1. Comparative Analysis (horizontal) and Common-size Analysis (vertical) AND Financial Ratio Analysis. The following condensed income statement and balance sheet are for CISCO Corporation, a large network company (dollars in thousands).

CISCO

2012 Annual Report

Consolidated Income Statement

	2012	2011
Sales	$36,000	$28,500
Cost of Goods Sold	12,500	9,700
Gross Profit	23,500	18,800
Operating Expenses	13,500	11,700
Operating Income	10,000	7,100
Net Income	$7,500	$5,600

CISCO

2012 Annual Report

Consolidated Balance Sheet

	2012	2011
Cash	$4,800	$3,300
Market Securities	18,500	14,500
Accounts Receivable	4,000	3,300
Inventory	1,400	1,300
Current Assets	28,700	22,400
Property, Plant, Equipment	3,900	3,400
Intangibles	14,500	11,300
Total Assets	$47,100	$37,100
Accounts Payable	$5,000	$4,200
Deferred Revenue	5,200	4,000
Other Liabilities	3,400	3,600
Current Liabilities	14,100	11,800
Long Term Debt	5,000	4,800
Total Equity	28,000	20,500
Total Liabilities & Equity	$47,100	$37,100

a. Prepare a comparative analysis (horiztonal) and a common-size analysis (vertical) of the income statement and balance sheet statement from 2012 and 2011. (Round computations to at least one decimal place.)

b. Compute the following ratios (round computations to at least one decimal place) for 2012 and 2011, and write at least ONE sentence did the ratio improve (get worse) and why?

Show computations:

(1) Current ratio

(2) Working capital

(3) Receivables turnover ratio (AVERAGE receivables in '11 = $3,000)

(4) Inventory turnover ratio (AVERAGE inventory in '11 = $1,200)

(5) Gross margin ratio

(6) Profit margin ratio

(7) Debt to assets ratio

(8) Earning per Share (weighted average shares outstanding totaled 6,500 shares in '12 and 6,200 shares in '11).

(9) P/E ratio (Stock price in '12 $22, '11 $18)

(10) Return on assets (AVERAGE assets 2011 = $35,000)

Finally, would you invest in this company based on the above ratios, use some substance as to why it makes sense to invest? Why did ratios improve or weaken?