Answer all the questions

Using Pamplin Inc.'s financial statements shown on the following pages:

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Pamplin Inc. Income Statement For Years Ending 12/31/2015 and 12/31/2016

		2015		2016
Sales (all credit)		$1,200		$1,450
Cost of goods sold		700		850
Gross profit		$ 500		$ 600
Operating expenses	30		40
Depreciation	220	250	200	240
Operating income		$ 250		$ 360
Interest expense		50		64
Net income before taxes		$ 200		$ 296
Taxes (40%)		80		118
Net income		$ 120		$ 178

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Pamplin Inc. Balance Sheet At 12/31/2015 and 12/31/2016

Assets
	2015	2016
Cash	$ 200	$ 150
Accounts receivable	450	425
Inventory	550	625
Current assets	$1,200	$1,200
Plant and equipment	$2,200	$2,600
Less: accumulated depreciation	(1,000)	(1,200)
Net plant and equipment	$1,200	$1,400
Total assets	$2,400	$2,600
Liabilities and Owners' Equity
	2015	2016
Accounts payable	$ 200	$ 150
Notes payablecurrent (9%)	0	150
Current liabilities	$ 200	$ 300
Bonds (81/3% interest)	$ 600	$ 600
Owners' equity
Common stock	$ 300	$ 300
Paid in capital	600	600
Retained earnings	700	800
Total owners' equity	$1,600	$1,700
Total liabilities and owners' equity	$2,400	$2,600

Compute the following ratios for both 2015 and 2016.

INDUSTRY NORMS
Current ratio	1.5 : 1
Inventory turnover	3 x
Total asset turnover	1 x
Operating profit margin	18%
Operating income return on investment	18%
Debt ratio	60%
Average collection period	100 days
Fixed asset turnover	1.5 :1
Return on equity	15%

How liquid is the firm?

Is management generating adequate operating profit on the firm's assets?

How is the firm financing its assets?

Are the common stockholders receiving a good return on their investment?