Financial information for Yazbeck Company is presented here.

profitability. YAZBECK COMPANY

(SO 6) Balance Sheets December 31 Assets __ 2007 _2 006_ Cash $ 50,000 $ 42,000 Short-term investments 80,000 50,000 Receivables 100,000 87,000 Inventories 410,000 300,000 Prepaid expenses 30,000 31,000 Land 75,000 75,000 Building and equipment (net) 570,000 400,000 Total assets $1,315,000 $985,000 Liabilities and Stockholders’ Equity Notes payable Accounts payable Accrued liabilities Bonds payable, due 2009 Common stock, $5 par Retained earnings Total liabilities and stockholders’ equity

$ 120,000 $ 25,000 160,000 90,000 50,000 50,000 180,000 100,000 500,000 500,000 305,000 220,000

$1,315,000 $985,000 YAZBECK COMPANY Income Statements For the Years Ended December 31 Sales Cost of goods sold Gross profit Operating expenses Net income Additional information:

Eae . kAlwl WsaNles were on account.

Instructions

(a) Indicate, by using ratios, the change in liquidity and profitability of the company from 2006 to 2007. (Note: Not all profitability ratios can be computed nor can cashbasis ratios be computed.)

(b) Given below are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2007, and (2) as of December 31, 2008, after giving effect to the situation. Net income for 2008 was 2007 2006

$1,000,000 $940,000 655,000 635,000 345,000 305,000 235,000 225,000

$110,000 $_80,000

. Inventory at the beginning of 2006 was $350,000.

. Receivables at the beginning of 2006 were $80,000.

. Total assets at the beginning of 2006 were $1,175,000.

No common stock transactions occurred during 2006 or 2007.

$125,000. Total assets on December 31, 2008, were $1,450,000.

Situation 1. 50,000 shares of common stock were sold at par on July 1, 2008. 2. All of the notes payable were paid in 2008. 3. The market price of common stock on December 31, 2008, was $6.25. The market price on December 31, 2007, was $5.