Below are the auditor's calculations of several key ratios for Cragston Star Products Ltd. The primary purpose of this information is to assess the risk of financial failure, but any other relevant conclusions are also desirable.

REQUIRED
a. What major conclusions can be drawn from this information about the company's future?
b. What additional information would be helpful in your assessment of this company's financial condition?
c. Based on the ratios above, which aspects of the company do you believe should receive special emphasis in the audit?

Transcribed Image Text:

Ratio 20X0 20X9 20X8 20X7 20X6 Current ratio Quick ratio Profit before taxes divided by 2.08 .97 3.50 2.26 134 3.20 2.51 182 4.10 2.43 1.76 5.30 2.50 1.64 710 interest expense Accounts receivable turnover Days to collect receivables Inventory turnover Days to sell inventory 4.20 108.20 2.03 172.60 Net sales divided by tangible assets 68 Operating profit divided by net sales.13 Operating profit divided by tangible09 5.50 83.10 1.84 195.10 64 14 09 4.10 105.20 2.68 133.90 .73 .16 .12 5.40 80.60 334 10780 69 15 .10 5.60 71.60 3.36 108.30 67 14 .09 Net profit divided by ordinary equity 05 S4.30 06 $426 .10 $4.49 .10 S4.26 Earnings per share $4.14