Dear Instructor,

Can I have your assistance in getting your thoughts on below question:

1) Calculate and interpret the financial ratios for 2016 corresponding to the industry norms provided as follows:

INDUSTRY NORMS

Current ratio: 1.5

Inventory turnover: 3

Total asset turnover: 1

Operating profit margin: 18%

Operating income return on investment: 18%

Debt ratio: 60%

Average collection period:100 days

Fixed asset turnover: 1.5

Return on equity: 15%

2)Comment on Company's financial position in terms of liquidity, profitability

and solvency as well as its overall performance, by using the ratios that you have found

and comparing them with the industry averages.

The Ferri Furniture Company: Balance Sheet as of December 31, 2016 (In Thousands)

Cash$ 277,000Accounts Payable$ 169,000

Receivables220,000Notes Payable74,000

Inventories145,000Other current liabilities57,000

Total current assets$ 642,000Total current liabilities$ 300,000

Net fixed assets305,500Long-term debt66,500

Common equity581,000

Total assets$ 947,500Total liabilities & equity$ 947,500

The Ferri Furniture Company: Income Statement for Year Ended December 31, 2016(InThousands)

Sales$ 3,231,000

Cost of Goods Sold

Material$ 947,000

Labour598,000

Heat, light and power90,000

Indirect labour149,000

Depreciation54,5001,838,500

Gross Profit$ 1,392,500

Selling Expenses115,000

General and Administrative expenses30,000

Earnings before interest and taxes (EBIT)$ 1,247,500

Interest expense22,500

Earnings before taxes (EBT)1,225,000

Corporate taxes (40%)490,000

Net income$735,000