HG Lang Designs operates an exclusive bridal boutique in Manhattan. All gowns are designed by Lang but are manufactured by various small firms in France and Italy. The following financial information for the company relates to Problems 1 through 4.

Mode Milano is a bridal gown manufacturing company in Milan. Recently, the company received an order for $400,000 of merchandise from HG Lang with payment to be made within 60 days of delivery. Mode asked Lang to provide a copy of its audited financial statements from 2009 and 2008 so that it could analyze them before accepting the order.

Required
a. Compute the following ratios to help Mode Milano decide whether to accept the order from HG Lang: Current ratio, acid-test, debt-to-equity ratio, times interest earned, and return on total assets.
b. Based on the analysis in part a, does it appear that HG Lang will have any difficulty paying its bill to Mode Milano?

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HG Lang Designs Balance Sheets December 31, 2009 December 31, 2008 Assets Current assets: Cash Accounts receivable Inventory Other current assets Total current assets Buildings, furniture, and fixtures, net Total assets 62,541 $ 84,584 338,652 320,378 1,725,425 59,859 2,186,477 1,548,942 $ 3,735,419 1,695,785 62,587 2,163,334 1,548,942 $ 3,712,276