In Problem 6, how might we determine whether these ratios reflect a well-managed, creditworthy company

Lake of Egypt Marina Inc.

Income Statement

for Years Ending December 31, 2018 and 2019

(in millions of dollars)

2018

2019

Net sales (all credit)

$432

$515

Less: Cost of goods sold

200

260

Gross profits

232

255

Less: Depreciation and other operating expenses

20

22

Earnings before interest and taxes (EBIT)

212

233

Less: Interest

30

33

Earnings before taxes (EBT)

182

200

Less: Taxes

55

57

Net income

$127

$143

Less: Preferred stock dividends

$ 5

$ 5

Net income available to common stockholders

122

138

Less: Common stock dividends

65

65

Addition to retained earnings

$ 57

$ 73

Lake of Egypt Maria Inc. Balance Sheet as of December 31, 2018 and 2019 in millions of dollars) 2018 2019 Liabilities & Equity 2018 2019 Current assets: Current liabilities: Cash and Accrued marketable wages and securities $ 65 $ 75 taxes $ 43 $ 40 Accounts Accounts receivable 110 115 payable 80 90 Inventory 190 200 Notes payable 70 80 Total $365 $390 Total $193 $210 Fixed assets: Long-term debt: $280 $300 Gross plant and equipment $471 $580 Stockholders' equity: Less: Depreciation 100 110 Preferred stock (2 million shares) $ 5 $ 5 Net plant Common stock and equipment $371 $470 and paid-in surplus (65 million shares) 65 65 Other long-term assets Total $420 $520 Retained earnings 242 330 Total $312 $400 Total Total liabilities $785 $910 and equity $785 $910 49 50 assets