This weeks module is about financial ratios and your assignment summarizes much of what you should have learned in the module. Please use Excelto answer the questions.

1. The financial statements and industry norms are shown below for Pamplin, Inc.: (50pts)

a. Compute the financial ratios for Pamplin for 2014 and 2015 to compute each against the industry norms. b. How liquid is the firm? c. Are its managers generating an adequate operating profit on the firms assets? d. How is the firm financing its assets? e. Are its managers generating a good return on equity?

Choose 6 from here to compare	Norms
Current Ratio	5.00
Acid Test (quick) ratio	3.00
Inventory Turnover	2.20
Average collection period	90.00
Debt Ratio	0.33
Times Interest earned	7.00
Fixed-asset turnover	1.00
Operating profit margin	20%
Return on common equity	9%

Pamplin Inc., Balance Sheet
Assets	2014	2015
Cash	$ 200	$ 150
Accounts Receivable	450	425
Inventory	550	625
Current Assets	$1,200	$1,200
Plant & Equipment	$2,200	$2,600
Less accumulated depreciation	(1,000)	(1,200)
Net plant & equipment	$1,200	$1,400
Total	625
Total Assets	$2,400	$2,600
Liabilities and Owners Equity
Accounts payable	$ 200	$ 150
Notes payable (9%)	0	150
Current Liabilities	$ 200	$ 300
Bonds (8.33% interest)	600	600
Total debt	$ 800	$ 900
Owners equity common stock	$300	$300
Paid-in capital	600	600
Retained earnings	700	700
Total owners equity	$1,600	$1,700
Total liabilities and owners equity	$2,400	$2,600
Income Statement	2014	2015
Sales*	$1,200	$1,450
Cost of goods sold	700	850
Gross profit	$ 500	$ 600
Operating (expenses)	(30)	(40)
Depreciation	220 250	200 240
Operating profits	$ 250	$ 360
Interest expense	(50)	(64)
Net income before taxes	$ 200	$ 296
Taxes (40%)	80	118
Net income	$ 120	$ 178

*15% of sales are cash sales, with the remaining 85% being credit sales

Be sure to do both the calculations AND the comments. Confine both calculations and comments to thesixratios for which you are responsible. You can use Text Boxesto show your comments. Please be sure to carefully read Part A, it asks you compare both years to the industry norms.