2. Walter is considering investing in the Bikes Ahoy Company. He goes online and looks up the company’s 10K, 10Q, and annual report, where he finds the latest balance sheet and income statement, shown below.

(LO 13-3)

BIKES AHOY Balance sheet

(numbers in the thousands)

Assets Cash and marketable securities $ 150 Accounts receivable 250 Inventories 250 Net fixed assets 900 Total assets $ 1,550 Accounts payable $ 200 Short-term debt 100 Long-term debt 350 Stockholders’ equity 900 Total liability/stockholders’ equity $ 1,550 Liabilities and Stockholders’ Equity BIKES AHOY Income Statement

(numbers in the thousands)

Revenue $ 2,900 Cost of goods sold 1,500 Gross profit 1,400 Operating expenses 800 EBIT 600 Interest paid 275 EBT 325 Taxes 132 Earnings after taxes $ 193

a. What is the company’s current ratio?

b. If the average current ratio for the bike-travel industry is 3.0, is Bikes Ahoy more liquid or less liquid than the average?

c. What is the debt ratio for Bikes Ahoy?

d. What is Bikes Ahoy’s profitability ratio?