In annual report, WRM Athletic Supply, Inc. includes the following five-year financial summary:
Analyze the company’s financial summary for the fiscal years 2016-2020 to decide whether to invest in the common stock of WRM. Include the following sections in your analysis, and fully explain your final decision.
a. Trend analysis for net sales and net income (use 2016 as the base year).
b. Profitability analysis.
c. Evaluation of the ability to sell merchandise inventory (WRM uses the LIFO method).
d. Evaluation of the ability to pay debts.
e. Evaluation of dividends.

WRM ATHLETIC SUPPLY, INC. Five-Year Financial Summary (Partial; adapted)
(Dollar amounts in thousands except per share data)	2020		2019		2018		2017		2016		2015
Net Sales		$290,000		$215,000		$194,000		$165,000		$139,000
Net Sales Increase		35%		11%		18%		19%		17%
Domestic Comparative Store Sales Increase		5%		7%		5%		8%		10%
Other Income--Net		2,050		1,810		1,790		1,660		1,300
Cost of Goods Sold		218,660		163,400		150,350		129,360		110,227
Selling and Administrative Expenses		41,236		36,356		31,679		27,408		22,516
Interest:
Interest Expense		(1,010)		(1,360)		(1,370)		(1,060)		(870)
Interest Income		120		160		165		225		155
Income Tax Expense		4,430		3,830		3,690		3,380		2,760
Net Income		26,834		12,024		8,866		5,677		4,082
Per Share of Common Stock:
Net Income		1.80		1.50		1.40		1.20		0.98
Dividends		0.40		0.38		0.34		0.30		0.26

Financial Position:

Current Assets, Excluding Merchandise Inventory		$30,400	$27,500	$26,200	$24,900	$21,700
Merchandise Inventory at LIFO Cost		24,200	22,500	21,400	19,900	17,100	$16,400
Property, Plant, and Equipment, Net		51,100	45,600	40,700	35,200	25,900
Total Assets		105,700	95,600	88,300	80,000	64,700
Current Liabilities		32,200	27,100	28,700	25,800	16,700
Long-term Debt		22,600	21,700	17,100	18,300	12,600
Stockholders’ Equity		50,900	46,800	42,500	35,900	35,400

Financial Ratios:

Acid-Test Ratio		0.9	1.0	0.9
Rate of Return on Total Assets		27.7%	14.6%	12.2%
Rate of Return on Common Stockholders’ Equity		54.9%	26.9%	22.6%

Answer rating: 100% (QA)

a Use the following table to prepare the trend analysis for net sales and net income to decide whether to invest in the common stock of the company The trend percent of net sales for the years 2016202... View the full answer