Dembo, Inc., a manufacturer of office furniture, reported the following data in its 2008 annual report. Dembo uses the LIFO inventory valuation method. Interest is reported as an operating expense and is not material in amount.

Required:
1. Compute Dembos

(a) current ratio,

(b) return on assets,

(c) debt/equity ratio, and

(d) inventory turnover using the company’s 2008 financial data as originally reported. Round answers to two decimal places.
2. Recompute the ratios in requirement | after transforming Dembo’s numbers to a FIFO basis. Ignore income tax effects.
3. For each ratio computed in requirements | and 2, indicate which computation (LIFO basis or FIFO basis) best captures the underlying economics.

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Dembo, Inc. Condensed Financial Statements Income Statement ($ in millions) Revenue Cost of sales Operating expenses Income taxes Net income Balance Sheet Current assets Property and equipment, net Year Ended December 31, 2008 $4,800.0 2,880.0 1,056.0 480.0 $ 384.0 December 31, 2008 $2,520.0 3,148.2 Intangibles and other assets Total assets Current liabilities 1,001.8 $6,670.0 $1,800.0 December 31, 2007 $6,130.0 Long-term liabilities 2,087.2 Stockholders' equity 2,782.8 Total liabilities and shareholders' equity $6,670.0 Inventories consist of December 31, 2008 December 31, 2007 Finished goods $ 389.4 $ 381.3. Work in process Raw materials Inventory-FIFO Less: LIFO reserve Inventory-LIFO 215.4 907.2 1,512.0 575.0 $ 937.0 215.1 823.6 1,420.0 557.0 $ 863.0