Complete ratio analysis, recognizing significant differences Home Health, Inc., has come to Jane Ross for a yearly financial checkup. As a first step, Jane has prepared a complete set of ratios for fiscal years 2018 and 2019 LOADING.... She will use them to look for significant changes in the company's situation from one year to the next. a. To focus on the degree of change, calculate the year-to-year proportional change by subtracting the year 2018 ratio from the year 2019 ratio, then dividing the difference by the year 2018 ratio. Multiply the result by 100. Preserve the positive or negative sign. The result is the percentage change in the ratio from 2018 to 2019. Calculate the proportional change for the ratios shown here. b. For any ratio that shows a year-to-year difference of 10% or more, state whether the difference is in the company's favor or not. c. For the most significant changes (25% or more), look at the other ratios and cite at least one other change that may have contributed to the change in the ratio that you are discussing. a. To focus on the degree of change, calculate the year-to-year proportional change for the ratios shown here. Liquidity Ratios Proportional Difference Current ratio nothing % (Round to two decimal places.) Liquidity Ratios Proportional Difference Quick ratio nothing % (Round to two decimal places.) Activity Ratios Proportional Difference Inventory turnover nothing % (Round to two decimal places.) Activity Ratios Proportional Difference Average collection period nothing % (Round to two decimal places.) Activity Ratios Proportional Difference Total asset turnover nothing % (Round to two decimal places.) Debt Ratio Proportional Difference Debt ratio nothing % (Round to two decimal places.) Debt Ratio Proportional Difference Times interest earned ratio nothing % (Round to two decimal places.) Profitability Ratios Proportional Difference Gross profit margin nothing % (Round to two decimal places.) Profitability Ratios Proportional Difference Operating profit margin nothing % (Round to two decimal places.) Profitability Ratios Proportional Difference Net profit margin nothing % (Round to two decimal places.) Profitability Ratios Proportional Difference Return on total assets nothing % (Round to two decimal places.) Profitability Ratios Proportional Difference Return on common equity nothing % (Round to two decimal places.) Market Ratios Proportional Difference Price/earnings ratio nothing % (Round to two decimal places.) Market Ratios Proportional Difference Market/book ratio nothing % (Round to two decimal places.) b. For any ratio that shows a year-to-year difference of 10% or more, state whether the difference is in the company's favor or not. Indicate whether the proportional difference is in the company's favor or not. (Select from the drop-down menus.) Liquidity Ratios Proportional Difference Company's Favor Quick ratio negative 10.04 % Yes No (Select from the drop-down menus.) Activity Ratios Proportional Difference Company's Favor Inventory turnover negative 19.69 % Yes No Average collection period negative 27.93 % Yes No Total asset turnover 44.68 % Yes No (Select from the drop-down menu.) Debt Ratio Proportional Difference Company's Favor Debt ratio 33.33 % Yes No (Select from the drop-down menus.) Profitability Ratios Proportional Difference Company's Favor Operating profit margin 15.38 % Yes No Return on total assets 41.74 % Yes No Return on common equity 99.53 % Yes No (Select from the drop-down menus.) Market Ratios Proportional Difference Company's Favor Market/book ratio negative 13.38 % Yes No c. For the most significant changes (25% or more), look at the other ratios and cite at least one other change that may have contributed to the change in the ratio that you are discussing. The average collection period decreased by negative 27.93 %. This could be because: (Select the best answer below.) A. there has been a change in credit terms. B. the accounts receivable decreased due to lower sales. C. there has been quicker collection. D. all of the above. The total asset turnover has increased by 44.68 %. This could be because: (Select the best answer below.) A. total assets have decreased. B. sales have increased. C. neither of the above. D. both A and B. The debt ratio has increased by 33.33 %. This could be because: (Select the best answer below.) A. there is a decrease in assets. B. there is an increase in debt. C. neither of the above. D. both A and B. The return on total assets has increased by 41.74 %. This could be because: (Select the best answer below.) A. the earnings available for common stockholders has increased. B. total assets have decreased. C. current assets have decreased. D. all of the above. The return on common equity has increased by 99.53 %. This could be because: (Select the best answer below.) A. retained earnings have decreased. B. the earnings available for common stockholders has increased. C. common stock equity has decreased. D. all of the above.

TIIVIIVIUI IU Ratio 2018 2019 Current ratio Quick ratio Inventory turnover Average collection period Total asset turnover Debt ratio Times interest earned ratio Gross profit margin Operating profit margin Net profit margin Return on total assets Return on common equity Pricelearnings ratio Market/book ratio 3.24 2.49 12.75 42.6 days 1.41 0.48 3.96 66% 13% 8.2% 11.5% 21.2% 10.3 1.42 2.96 2.24 10.24 30.7 days 2.04 0.64 3.87 63% 15% 8.0% 16.3% 42.3% 9.4 1.23 TIIVIIVIUI IU Ratio 2018 2019 Current ratio Quick ratio Inventory turnover Average collection period Total asset turnover Debt ratio Times interest earned ratio Gross profit margin Operating profit margin Net profit margin Return on total assets Return on common equity Pricelearnings ratio Market/book ratio 3.24 2.49 12.75 42.6 days 1.41 0.48 3.96 66% 13% 8.2% 11.5% 21.2% 10.3 1.42 2.96 2.24 10.24 30.7 days 2.04 0.64 3.87 63% 15% 8.0% 16.3% 42.3% 9.4 1.23