Ratios from Comparative and Common$-$Size Data

Consider the following financial statements for Vega Company. During the current year, management obtained additional bond financing to enlarge its production facilities. The plant addition produced a new high$-$margin product, which is supposed to improve the average rate of gross profit and return on sales.

As a potential investor, you decide to analyze the financial statements:

VEGA COMPANY

Balance Sheets

$($Thousands of Dollars$)$

Dec. $31,$ Current Year Dec. $31,$ Prior Year

Assets

Cash $$21,000$ $$16,100$

Accounts receivable $($net$)39,00021,400$

Inventory $105,00072,000$

Prepaid expenses $1,5003,000$

Plant and other assets $($net$)463,500427,500$

Total Assets $$630,000$ $$540,000$

Liabilities and Stockholders$$ Equity

Current liabilities $$76,000$ $$45,000$

$9\%$ Bonds payable $187,500150,000$

$8\%$ Preferred stock, $$50$ Par Value $60,00060,000$

Common stock, $$10$ Par Value $225,000225,000$

Retained earnings $81,50060,000$

Total Liabilities and Stockholders$$ Equity $$630,000$ $$540,000$

VEGA COMPANY

Income Statements

$($Thousands of Dollars$)$

Current Year Prior Year

Sales revenue $$840,000$ $$697,500$

Cost of goods sold $552,000474,000$

Gross profit on sales $288,000223,500$

Selling and administrative expenses $231,000174,000$

Income before interest expense and income taxes $57,00049,500$

Interest expense $16,80013,500$

Income before income taxes $40,20036,000$

Income tax expense $14,10012,600$

Net income $$26,100$ $$23,400$

Other financial data $($thousands of dollars$)$

Cash provided by operating activities $$30,000$ $$25,000$

Preferred stock dividends $4,8004,800$

Required

a$.$ Calculate the following for each year: current ratio, quick ratio, operating$-$cash$-$flow$-$to$-$current liabilities ratio $($current liabilities were $$42$ million at January $1$ of the prior year$),$ inventory turnover $($inventory was $$68$ million at January $1$ of the prior year$),$ debt$-$to$-$equity ratio, times$-$interest$-$earned ratio, return on assets $($total assets were $$472$ million at January $1$ of the prior year$),$ and return on common stockholders$$ equity $($common stockholders$$ equity was $$266$ million at January $1$ of the prior year$).$

b$.$ Calculate common$$size percentage for each year$$s income statement.

Round answers to two decimal places.