Please refer to Case 4.30 on pages 134–135 for the

Please refer to Case 4.30 on pages 134–135 for the financial statement data needed for the analysis of this case. You should also review the solution to Case 4.30, provided by your instructor, before attempting to complete this case.

Required:

a. Case 4.30 presents the 2019 income statement and for Gerrard Construction Co. What other are required? What information would these statements communicate that could not be determined by reviewing only the income statement and balance sheet?

b. Briefly describe the note disclosures that should be provided by Gerrard Construction Co., and explain why note disclosures are considered an integral part of the financial statements.

c. Assume that the balance of “Accounts Receivable, net” at December 31, 2018, was $24,600. Calculate the following activity measures for Gerrard Construction Co. for the year ended December 31, 2019:

1. Accounts receivable turnover.

2. Number of days’ sales in accounts receivable.

d. Calculate the following financial leverage measures for Gerrard Construction Co. at December 31, 2019:

1. Debt ratio.

2. Debt/equity ratio.

e. Gerrard Construction Co. wishes to lease some new earthmoving equipment from Caterpillar on a long-term basis. What impact (increase, decrease, or no effect) would a financing lease of $12 million have on the company’s debt ratio and debt/equity ratio? (Note: These items were computed in part d and do not need to be recomputed for this requirement.)

f. Review the answer to Case 4.30 part i at this time. Assume that Gerrard Construction Co. had 4,800,000 shares of $1 outstanding throughout 2019, and that the market price per share of at December 31, 2019, was $57.50. Calculate the following profitability measures for the year ended December 31, 2019:

1. Earnings per share of common stock.

2. Price/earnings ratio.

3. yield.

4. payout ratio.

Case 4.30

Gerrard Construction Co. is an excavation contractor. The following summarized data (in thousands) are taken from the December 31, 2019, financial statements:

At December 31, 2018, total assets were $246,000 and total stockholders’ equity was $97,800. There were no changes in notes payable or paid-in capital during 2019.

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