Consider the data for Ryan Company in Exhibit Assume all
Consider the data for Ryan Company in Exhibit. Assume all sales are on credit.
1. Compute the following ratios for the years 20X2 and 20X3:
a. Percentage of net income to stockholders’ equity (ROE)
b. Gross profit rate
c. Percent of net income to sales
d. Ratio of total debt to stockholders’ equity (define total debt as total liabilities)
e. Inventory turnover
f. Current ratio
g. Average collection period for accounts receivable


2. For each of the following items, indicate whether the change from 20X2 to 20X3 for Ryan
Company seems to be favorable or unfavorable, and identify the ratios you computed previously that most directly support your answer. The first two items that follow are given as an example.
a. Return to owners, favorable, a
b. Gross profit rate basically unchanged, b (increased from 45.3% to 45.6%, could answer favorable)
c. Ability to pay current debts on time
d. Collectibility of receivables
e. Risks of insolvency
f. Salability of merchandise
g. Return on sales
h. Overall accomplishment
i. Coordination of buying and selling functions
j. Screening of risks in granting credit tocustomers
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