Solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance.

Income Statement Year 2010
Net sales........................$795
Cost of goods sold.............660
Gross profit.....................135
Selling expenses................73.5
Depreciation......................12
EBIT..............................49.5
Interest expense...................4.5
EBT.................................45
Taxes (40%).......................18
Net income........................27
Calculate the following ratios AND interpret the result against the industry average:

2. Analysis:
Give your interpretation of what the ratios calculations show and how the business can use this information to improve its performance. Justify all answers.

Transcribed Image Text:

alance Sheet as of December 31,2010 Gary and Company Cash 45 ounts payables Notes payables Other current liabilities Total current liabilities cc 45 eceivables nventory 159 etable securities 303 147 450 otal current assets et fixed assets ong Term Liabilities Long-term debt Total Liabilities Total Assets 24 135 wners Equitv 114 01 315 ommon stock etained earmings Total stockholders equity Total liabilities and equity 50 Industry Your Interpretation atio ge (Good-Fair-Low -Poor) 3% 9% 16X 108 2X 3X 2X 1.5X 7X ofit margin on sales etum on assets eceivable turmover Inventory turnover ixed asset tumover Total asset turnover Current ratio Quickrati