The last two years of financial statements for Carver Industries are as follows:

Carver Industries

Balance Sheets for December 31, 2012 and 2013

Carver Industries
Income Statements
Years Ending December 31, 2012 and 2013

a. Calculate the following financial ratios for 2012 and 2013:

b. Evaluate the firm’s financial position at the end of 2012 in terms of its liquidity, capital structure, asset management efficiency, and profitability.
c. At the end of 2013 the firm has 5,000 shares of common stock outstanding, selling for $15 each. What were the firm’s (i) earnings per share, (ii) price-earnings ratio, and (iii) market-to-book ratio?
d. What observations can you make about the financial condition and performance of the firm from your answers to parts a throughc?

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Accounts receivable Total current assets Buildings and equipment Less: Accumulated depreciation (35,000) Total fixed assets $ (49,400) assets Accounts Short-term bank notes Total current liabilities term Total debt and equity $140,625 2012 2013 Sales (all credit) Cost of goods sold $187.500 400,000 112,500) (240,000) 75,000 160,000 Operating expenses Fixed cash operating expenses Variable operating expenses Depreciation expense Total operating expenses Earnings before interest and taxes Interest expense Earnings before taxes Taxes Net income $(31.500) (52,500) (18,750) (40,000) (6,750) (25,000) S657000 (117,500 42,500 9,094) S 33,407 (16,703) 18,000 S (5,719) (6,141) 6,141 16,703 Industry Averages 2012 2013 2.00 0.80 37 days Current ratio Acid-test ratio Average collection period Inventory turnover Debt ratio Times interest earned Operating profit margin Total asset turnover Fixed asset turnover Operating return on assets Return on equity 58.00% 3.80 1 0.00% 1.14 1.40 11 .40% 9.50%