Winter Corporation has just completed its comparative statements for the year ended December 31, 2012. At this point, certain analytical and interpretive procedures are to be undertaken. The completed statements (summarized) are as follows:

*Credit sales totaled 40 percent.
**$20,000 of bonds were issued on 1/2/2012. Assume the tax rate is 30%.
†The market price of the stock at the end of 2012 was $18 per share.
‡During 2012, the company declared and paid a cash dividend of $9,000.
Required:
1. Compute appropriate ratios for 2012 and explain the meaning of each.
2. Respond to the following for 2012:
a. Evaluate the financial leverage. Explain its meaning using the computed amount(s).
b. Evaluate the profit margin amount and explain how a stockholder might use it.
c. Explain to a stockholder why the current ratio and the quick ratio are different. Do you observe any liquidity problems? Explain.
d. Assuming that credit terms are 1/10, n/30, do you perceive an unfavorable situation for the company related to credit sales?Explain.

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2012 2011 Income Statement Sales revenue $453,000* 250,000 $447,000* 241,000 Cost of goods sold Gross profit Operating expenses (including interest on bonds) 203,000 206,000 168,000 167,000 Pretax income 36,000 10,800 38,000 11,400 Income tax $ 25.200 S 26,600 Net income Balance Sheet $ 6,800 42,000 $ 3,900 29,000 Cash Accounts receivable (net) Merchandise inventory Prepaid expenses Operational assets (net) 25,000 18,000 200 100 130,000 $204,000 $ 17,000 120,000 $171,000 $ 18,000 Accounts payable Income taxes payable Bonds payable (10% interest rate) Common stock (par $5) Retained earnings 1,000 1,000 70,000** 100,000 16,000 50,000 100,000 2,000 $204,000 $171,000