Page 81 - Financial Statement Analysis

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58 Financial Statement Analysis

LAKELAND CORPORATION
Statement of Income and Retained Earnings
For Years Ended December 31, Year 5 and Year 4

Year 5 Year 4
Revenues
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $48,400,000 $41,700,000
Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,000 25,000
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 —
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $48,500,000 $41,725,000
Costs and expenses
Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,460,000 $29,190,000
Selling, general, and administrative . . . . . . . . . 12,090,000 8,785,000
Interest on 5% sinking fund debentures . . . . . . 275,000 300,000
Provision for Federal income taxes . . . . . . . . . . . 2,315,000 1,695,000
Total costs and expenses . . . . . . . . . . . . . . . . . . $46,140,000 $39,970,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,360,000 $ 1,755,000

Retained earnings, beginning of year . . . . . . . . . . . 7,965,000 6,760,000
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,325,000 $ 8,515,000
Dividends paid
Preferred stock, $1.00 per share in cash . . . . . . 50,000 50,000
Common stock
Cash—$1.00 per share . . . . . . . . . . . . . . . . . 525,000 500,000
Stock—(10%)—50,000 shares at
market value of $50 per share . . . . . . . . . . 2,500,000 —
Total dividends paid . . . . . . . . . . . . . . . . . . . . $ 3,075,000 $ 550,000
Retained earnings, end of year . . . . . . . . . . . . . . . . $ 7,250,000 $ 7,965,000

Additional Information:
1. Inventory at January 1, Year 4, is $6,850,000.
2. Market prices of common stock at December 31, Year 5 and Year 4, are $73.50 and $47.75, respectively.
3. Cash dividends for both preferred and common stock are declared and paid in June and December of each year.
The stock dividend on common stock is declared and distributed in August of Year 5.
4. Plant and equipment disposals during Year 5 and Year 4 are $375,000 and $425,000, respectively. Related
accumulated depreciation is $215,000 in Year 5 and $335,000 in Year 4. At December 31, Year 3, the plant and
equipment asset balance is $21,470,000, and its related accumulated depreciation is $11,650,000.

Required:
Compute the following financial ratios and figures for both Year 5 and Year 4. Identify and discuss
any significant year-to-year changes.