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Analyzing a company for its investment potential In its annual report, WRM Athletic Supply, Inc. includes the following five year financial summary: 2015 Oxid 2017 $ 165,000 19% 8% 1,660 129,360 27.408 2016 $139,000 17% 10% 1,300 110,227 22,516 (8701 WRM ATHLETIC SUPPLY, INC. Five-Year Financial Summary (Partial; adapted) (Dollar amounts in thousands except per share data) 2020 2019 2018 Net Sales $ 290,000 $215,000 $ 194,000 Net Sales Increase 35% 11% 18% Domestic Comparative Store Sales Increase 5% 7 % 5% Other Income-Net 2,050 1,810 1 ,790 Cod G Cost of Goods Sold al 660 163,400 150,350 Selling and Administrative Expenses 1.236 36.356 31,679 Interest Interest Expense 010) 1.360) (1,370) Interest Income 160 165 Income Tax Expense 3,8303 ,690 Net Income 12.0248,866 Per Share of Common Stock Net Income 150 1.40 Dividends 0.38 0.34 Financial Position Current Assets, Excluding Merchandise inventory $ 30,400 5 27.500 $26.2005 Merchandise Inventory at UFO Cost 24.200 22.500 21.400 Property. Plant, and Equipment, Net 51.100 45.600 40,700 Total Assets 105,700 95,600 88,300 Current Liabilities 32,200 27,100 28,700 Long-term Debt 22,600 21,700 17.100 Stockholders' Equity 50,900 46,800 42,500 Financial Ratios Acid-Test Ratio 09 Rate of Return on Total Assets 27.75 146% Rate of Retum on Common Stockholders' Euty 5494 269 2260 (1.060) 225 3,380 5,677 2,760 4,082 1.20 0.30 0.98 0.26 $16,400 24,900 19.900 35.200 80.000 25,800 18,300 35,900 $ 21,700 17,100 25.900 64.700 16,700 12,600 35,400 10 1.0 8.39 15.4% 159 Requirements 1. Analyze the company's financial summary for the fiscal years 2016-2020 to decide whether to invest in the common stock of WRM. Include the following sections in your analysis, and fully explain your final decision. a. Trend analysis for net sales and net income (use 2016 as the base year). b. Profitability analysis. c. Evaluation of the ability to sell merchandise inventory (WRM uses the LIFO method). d. Evaluation of the ability to pay debts. e. Evaluation of dividends. Requirement 1 2020 2019 2018 2017 2016 Total net revenues Trend percentages 5 Net earnings 6 Trend percentages 8 Requirement 2 2020 2019 2018 2017 2016 10 Net income 11 Net sales 12 Profit margin ratio 13 2020 2019 2018 2017 2016 17 Requirement 3 18 19 Net sales 20 Cost of goods sold 21 Gross profit 22 Gross profit percentage 23 24 Beginning inventory 25 Ending inventory 26 Average inventory 28 Inventory turnover 29 Days' sales in inventory 32 Requirement 4 2020 2019 2018 2017 2016 34 Total Assets 35 Total Equity 36 Total Liabilities 38 Debt Ratio 39 Debt to quity Ratio Module 7 ED-15 E D-16 Average: 2018 ED-20 Count: 5 E D-21 Sum: 10090 Comprehensive Prob E- Insert Draw Page Layout Formulas Data Review >> Conditional Formatting 2 Format as Table Cell Styles Font Alignment Number B53 x A fc 2020 B C D E 32 Requirement 4 2020 2019 2018 2017 34 Total Assets 35 Total Equity 36 Total Liabilities 38 Debt Ratio 39 Debt to Equity Ratio 40 41 Net Income 42 Income Tax Expense 43 Interest Expense 44 Total 45 Times-interest-earned ratio 46 Current ratio Quick ratio 52 Requirement 5 2020 2019 2018 2017 2016 54 Annual dividend per share 55 Earnings per share 57 Dividend payout