Question

Use the following information to answer the questions on page 2 below Note: all sales are credit sales Income Stmt info: 2017 2018 less Cost of Goods Sold: Gross Profit Operating Expenses Earnings before Interest & Taxes Interest exp earnings before Taxes Taxes Net Income Sales 1,000,000 $1,100,000 424,000 676,000 365,750 310,250 25,500 284,750 113,900 170,850 400,000 600,000 350,000 250,000 25,000 225,000 90,000 135,000 $ 12/31/ Balance Sheet info: Cash Accounts Receivable Inventory Total Current Assets Fixed Assets (Net) Total Assets 2017 12/31/2018 30,000 51,000 125,000 131.250 212,250 300,000 315,000 S500,000 S 52Z250 25,000 $ 50,000 $ 200,000 $ Current Liabilities Long Term Liabilities Total Liabilities Stockholder's Equity Total Liab & Equity 110,000 $ 180,000 290,000 $ 210,000 121,000 188,000 309,000 218,250

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Answer 1

	2017	2018	Getting Better or Getting Worse?	2018 Industry Average	"Good" or "Bad" compared to Industry Avg
Profit Margin	0.14	0.16	Better	0.11	Good
Current Ratio	1.82	1.75	Worse	1.90	Bad
Quick Ratio	0.68	0.67	Worse	0.66	Good
Return on Assets	0.27	0.32	Better	0.28	Good
Debt to Assets	0.58	0.59	Worse	0.50	Bad
Receivables turnover	20.00	21.57	Better	18.00	Good
Avg. collection period	18.00	16.69	Better	15.50	Bad
Inventory Turnover	8.00	8.38	Better	9.25	Bad
Return on Equity	0.64	0.78	Better	0.55	Good
Times Interest Earned	10.00	12.17	Better	11.15	Good

Formulae used:

Profit margin = Net income/Sales

Current ratio = Current assets/Current liabilities

Quick ratio = Quick assets/Current liabilities

Quick assets = Cash + Accounts receivable

Return on assets = Net income/Average Total assets

Debt to Assets = Total debt/Total assets

Receivables turnover = Sales/Average Accounts receivables

Average collection period = 360 days/Receivables turnover

Inventory turnover = Cost of goods sold/Average inventory OR Sales/Average inventory

Return on equity = Net income/Average stockholders' equity

Times interest earned ratio = EBIT/Interest

Note: In place of averages, ending balances have been used since balances of 2016 not provided for computing averages for 2017.

Use appropriate formula listed in the text for inventory turnover since the same has not been provided with the question.