Solved by verified expert :In its annual report, WRS Athletic Supply, Inc. includes the
following five-year financial summary.
WRS ATHLETIC SUPPLY, INC.
Five-Year Financial Summary (Partial; adapted)
(Dollar amounts in thousands except per share data) 2018
2017 2016 2015 2014 2013
Net Sales $244,524 $217,799 $191,329 $165,013 $137,634
Net Sales Increase 12% 14% 16% 20% 17%
Domestic Comparative Store Sales Increase 5% 6% 5% 8% 9%
Other Income-Net 2,001 1,873 1,787 1,615 1,391
Cost of Goods Sold 191,838 171,562 150,255 129,664 108,725
Operating, Selling, and General and Administrative Expenses
41,236 36,356 31,679 27,408 22,516
Interest:
Interest Expense (1,063) (1,357) (1,383) (1,045) (803)
Interest Income 138 171 188 204 189
Income Tax Expense 4,487 3,897 3,692 3,338 2,740
Net Income 8,039 6,671 6,295 5,377 4,430
Per Share of Common Stock:
Net Income 1.81 1.49 1.41 1.21 0.99
Dividends 0.30 0.28 0.24 0.20 0.16
Financial Position
Current Assets, Excluding Merchandise Inventory $ 30,483 $
27,878 $ 26,555 $ 24,356 $ 21,132
Merchandise Inventory at LIFO Cost 24,891 22,614 21,442
19,793 17,076 $16,497
Property, Plant, and Equipment, Net 51,904 45,750 40,934
35,969 25,973
Total Assets 94,685 83,527 78,130 70,349 49,996
Current Liabilities 32,617 27,282 28,949 25,803 16,762
Long-term Debt 22,731 21,143 17,838 18,712 12,122
Shareholders’ Equity 39,337 35,102 31,343 25,834 21,112
Financial Ratios
Acid-test Ratio 0.9 1.0 0.9 0.9 1.3
Rate of Return on Total Assets 10.2% 9.9% 10.3% 10.7% 9.6%
Rate of Return on Shareholders’ Equity 21.6% 20.1% 22.0%
22.9% 22.4%
Requirements
1. Analyze the company’s financial summary for the fiscal
years 2014-2018 to decide whether to invest in the common stock of WRS. Include
the following sections in your analysis, and fully explain your final decision.
1. Trend analysis for net sales and net income (use 2014 as
the base year).
2. Profitability analysis.
3. Evaluation of the ability to sell merchandise inventory
(WRS uses the LIFO method).
4. Evaluation of the ability to pay debts.
5. Evaluation of dividends.
