Following are data from the financial statements for Drury Lane Company:

Drury Lane Company

Selected Financial Statement Data

For the Years Ended December 31, 2013 and 2012

(In millions of dollars)

................................................................................... 2013 .................. 2012

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 90,000 .............. $85,000

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,000 ............... 98,000

Stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,000 ............... 32,000

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,200 .................. 8,500

Cash from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,300 ................ 20,100

Cash paid for capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . 13,100 ................ 12,900

Cash paid for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800 .................... 900

Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800 .................. 1,500

Cash paid for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,300 .................. 3,000

Instructions:

1. Compute the following for 2012 and 2013.

(a) Return on sales

(b) Return on assets

(c) Return on equity

(d) Cash-flow-to-net-income ratio

(e) Cash flow adequacy ratio

(f) Cash times interest earned ratio

2. In which year did Drury Lane Company perform better, 2012 or 2013? Explain your answer.

3. Drury Lane Company intends to sell a large block of newly issued stock to the public in the first half of 2014. Given your computations in (1), what questions would you like to ask of Drury Lane's management before investing in the newly issued stock?