1. Why are ratios useful? What three groups use ratio analysis and for what reasons?
2. Refer to the above companys financial statements. Calculate the current and quick ratios. Has the companys liquidity position improved or worsened? Explain.

2. Calculate the inventory turnover, days sales outstanding (DSO), fixed assets turnover, and total assets turnover. Has the companys ability to manage its assets improved or worsened? Explain.

3. Calculate the profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). How has the companys profitability changed during the last year?

4. What are the firms major strengths and weaknesses? (The industry averages are listed below for reference)

A computer manufacturer has financial statements as follows: Income Statements for Year Ending December 31 Thousands of Dollars) Sales Expenses excluding depreciation and amortization EBITDA Depreciation and amortization EBIT Interest Expense EBT Taxes (40%) Net income 2016 5945,000 812.700 $132.300 33.100 $99,200 10.470 $88.730 35,492 $53.238 2015 $900,000 774,000 $126,000 31,600 $94,500 8.800 $85,900 34 360 $51.540 Common dividends Addition to retained earnings $43,300 $9,938 $41,230 $10,310 Balance Sheets for Year Ending December 31 (Thousands of Dollars) Assets Cash and cash equivalents Short-term investments Acoounts Receivable Inventaries Tatal current assets Net fixed assets Total assets 2015 $47,250 3,800 283,500 141750 5476,300 330,750 SRAZAS 2015 $45,000 3.600 270,000 135,000 $453,600 315,000 576.AR Llabilizes and equizy Accounts payable Accruals Nates payable Tatal current liabilities Long-term debt Tatal liabilities Camman stock Retained Earnings Total common equity Total liabilities and equity 594,500 47,250 26,262 $168,012 94,500 $262,512 444,600 99,938 $544,538 SR07.050 $90,000 45,000 9,000 $144,000 90,000 $234.000 444.600 90.000 $534,600 S768.00 Other data Tax rate Shares outstanding Stock price 40% 15,000,000 $65 per share WACC 3% A computer manufacturer has financial statements as follows: Income Statements for Year Ending December 31 Thousands of Dollars) Sales Expenses excluding depreciation and amortization EBITDA Depreciation and amortization EBIT Interest Expense EBT Taxes (40%) Net income 2016 5945,000 812.700 $132.300 33.100 $99,200 10.470 $88.730 35,492 $53.238 2015 $900,000 774,000 $126,000 31,600 $94,500 8.800 $85,900 34 360 $51.540 Common dividends Addition to retained earnings $43,300 $9,938 $41,230 $10,310 Balance Sheets for Year Ending December 31 (Thousands of Dollars) Assets Cash and cash equivalents Short-term investments Acoounts Receivable Inventaries Tatal current assets Net fixed assets Total assets 2015 $47,250 3,800 283,500 141750 5476,300 330,750 SRAZAS 2015 $45,000 3.600 270,000 135,000 $453,600 315,000 576.AR Llabilizes and equizy Accounts payable Accruals Nates payable Tatal current liabilities Long-term debt Tatal liabilities Camman stock Retained Earnings Total common equity Total liabilities and equity 594,500 47,250 26,262 $168,012 94,500 $262,512 444,600 99,938 $544,538 SR07.050 $90,000 45,000 9,000 $144,000 90,000 $234.000 444.600 90.000 $534,600 S768.00 Other data Tax rate Shares outstanding Stock price 40% 15,000,000 $65 per share WACC 3%