In its annual report, XYZ Athletic Supply, Inc. includes the following five-year financial summary:

Requirements
Analyze the company's financial summary for the fiscal years 2014-2018 to decide whether to invest in the common stock of XYZ. Include the following sections in your analysis.
1. Trend analysis for net sales revenue and net income (use 2014 as the base year).
2. Profitability analysis.
3. Evaluation of the ability to sell merchandise inventory.
4. Evaluation of the ability to pay debts.
5. Evaluation of dividends.
6. Should you invest in the common stock of XYZ Athletic Supply, Inc.? Fully explain your final decision

Transcribed Image Text:

XYZ ATHLETIC SUPPLY, INC. Five-Year Financial Summary (Partial; adapted) (Dollar amounts in thousands except per share data) 2018 2017 2016 2015 2014 2013 $ 275,000 $ 22,000 $ 199,000 $ 171,000 $ 131,000 Net Sales Revenue Net Sales Revenue Increase 24% 12% 31% 16% 17% Domestic Comparative Store Sales Increase 6% 6% 5% 8% 10% Other Income-Net 2,090 1,780 1,770 1,700 1,310 Cost of Goods Sold 208,725 169,386 154,822 134,235 103,883 Selling and Administrative Expenses 31,670 27,450 41,280 36,340 22,540 Interest: (1,070) (800) (1,370) (1,330) (1,100) Interest Expense Interest Income 140 155 150 230 140 3,390 Income Tax Expense 4,420 3,900 3,610 2,730 Net Income 21,735 12,939 9,488 6,755 2,497 Per Share of Common Stock: Net Income 0.70 1.10 0.80 0.50 0.28 Dividends 0.35 0.45 0.43 0.39 0.31 Financial Position $ 27,200 $ 30,900 $ 26,800 $ 24,400 $ 21,800 Current Assets, Excluding Merchandise Inventory $ 16,800 Merchandise Inventory 24,700 22,400 21,600 19,300 17,000 Property, Plant, and Equipment, Net 40,500 35,000 51,600 46,200 25,200 Total Assets 78,700 107,200 95,800 88,900 64,000 Current Liabilities 27,800 32,600 28,800 25,600 17,000 Long-term Debt 23,000 21,200 16,800 18,600 12,900 Stockholders' Equity 43,300 51,600 46,800 35,500 34,100 Financial Ratios Acid-Test Ratio 1.3 0.9 1.0 0.9 1.0 Rate of Return on Total Assets 15.5% 12.8% 9.9% 22.5% 10.9% Rate of Return on Common Stockholders' Equity 44.2% 28.7% 24.1% 19.4% 18.9%