Listed here, are the 2018 and 2019 balance sheets and income statements for Otago Bay Marine Motors, a major manufacturer of top-of-the-line outboard motors.

a. On the basis of the information provided, calculate the following financial ratios for 2018 and 2019.

b. Considering the financial ratios you computed, along with the industry averages, how would you characterize the financial condition of Otago Bay Marine Motors? Explain.

Otago Bay Marine Motors Balance Sheets ($ in thousands) As of December 31, 2019 2018 Assets Current assets Cash and cash equivalents 57,834 87,593 Accounts receivable, net of allowances 20,964 11,028 Inventories 29,387 22,008 Prepaid expenses 4,734 4,205 Total current assets 112,919 124,834 Property, plant, and equipment, at cost 138,350 84,581 Less: Accumulated depreciation and amortization -49,051 -44,050 Net fixed assets 89,299 40,531 Other assets 100,081 59,458 Total assets 302,299 224,823 Liabilities and Shareholders' Equity Current liabilities Notes and accounts payable 27,832 4,930 Dividends payable 987 766 Accrued liabilities 19,333 17,482 Total current liabilities 48,152 23,178 Noncurrent liabilities Long-term debt 41,327 21,289 Shareholders' equity Common stock 8,166 5,679 Capital in excess of par value 110,171 87,713 Retained earnings 94,483 86,964 Total shareholders' equity 212,820 180,356 Total liabilities and equity 302,299 224,823 Average number of common shares outstanding 10,541,000 10,541,000

Otago Bay Marine Motors Income Statements ($ in thousands) For the Year For the Year Ended December 31, Ended December 31, 2019 2018 Sales revenue 258,594 245,055 Cost of goods sold 134,042 127,959 Gross profit margin 124,552 117,096 Operating expenses 73,923 69,647 Earnings from operations 50,629 47,449 Other income (expense), net 2,787 4,258

Otago Bay Marine Motors 2019 2018 Industry Averages (for 2010) Current ratio 2.51 Total asset turnover 1.27 Debt-equity ratio 10.65% Net profit margin 9.06% ROA 15.86% ROE 19.35% EPS $1.68 P/E ratio 19.19 Dividend yield 0.36% Payout ratio 26.13% Price-to-book-value ratio 6.65 Earnings before income taxes 53,416 51,707 Provision for income taxes 20,298 19,649 Net earnings 33,118 32,058 Cash dividends ($0.34 and $0.21 per share) 3,584 2,214 Average price per share of common stock (in the fourth quarter of the year) 69.16 82.41