Keystone Resources has a net profit margin of 8 percent and earnings after taxes of $2 million. Its current balance sheet is as follows:

a. Calculate Keystone€™s return on stockholders€™ equity.
b. Industry average ratios are
Net profit margin ........ 10%
Total asset turnover ...... 2.0 times
Equity multiplier ........ 1.5 times
What does a comparison of Keystone to these averages indicate about the firm€™s strengths and weaknesses?
c. Keystone has inventories of $3.2 million. Compute the firm€™s quickratio.

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Current assets Fixed assets Total assets 6,000,000 nt liabilities 10,000,000 Long-term debt $16.000,000 Common stock $3,500,000 5,500,000 2,000,000 5,000.000 Retained earnings Total liabilities and stockholders' equity $16000,000