You have been asked to evaluate DD Developers, LLC, a residential condo developer. Use the following information from the current year financial statements of a company to evaluate the following key financial metrics:

1. Liquidity – compute the Current and Quick ratios.
2. Solvency – compute the Times Interest Earned and Debt ratios.
3. Profitability – compute the Gross Profit and Return on Sales ratios and the Return on Assets and Return on Equity Ratios. (Assume the prior year's common stock balance was $480,000 and the retained earnings balance was $128,000.)
4. Note – The industry averages for the following metrics are known:

• Times Int Earned – 4.6
• Debt Ratio – .66
• Gross Profit Margin – .35
• Return on Sales – .12
• Current Ratio – 1.38
• Acid Test – 1.1

6. Please provide your assessment on:

• DDD’s solvency and leverage
• DDD’s profitability
• Even though you don’t have the industry averages for Return on Assets or Return on Equity, how would you guess it compares and why?

Income statement data:
Sales (all on credit).....................................................................	$1,075,000
Cost of goods sold.....................................................................	575,000
Gross profit on sales.....................................................................	$ 500,000
Operating expenses.....................................................................	305,000
Operating income.....................................................................	$ 195,000
Interest expense.....................................................................	20,400
Income before taxes.....................................................................	$ 174,600
Income taxes.....................................................................	74,000
Net income.....................................................................	$ 100,600

Balance sheet data:
Cash	$ 38,400
Accounts receivable	120,000
Inventory	56,700
Prepaid Expenses	24,000
Total current assets	$239,100
Total plant assets	708,900
Total assets	$948,000
Accounts payable	$ 91,200
Interest payable	4,800
Long-term liabilities	204,000
Total liabilities	$300,000
Common stock, $10 par	480,000
Retained earnings	168,000
Total liabilities and equity	$948,000