. Eleanor's Computers is a retailer of computer products. Using the financial data provided, complete the financial ratio calculations for 2007. Advise management of any ratios that indicate potential problems and provide an explanation of possible causes of the problems Financial Ratios 2005 2006 2007 Industry Averages 2007 Current ratio1.71 X 1.65 X 1.70 X Quick ratio 92 X .89 X .95 X Average collection period. 60 days 60 days 65 days Inventory turnover 4.20 X 3.90 X 4.50 X Fixed asset turnover 3.20 X 3.33 X 3.00 X Total asset turnover 1.40 X 1.35 X 1.37 X Debt ratio 59.20 % 61.00% 60.00% Times interest earned 

4.20 X 3.70 X 4.75 X Gross profit margin 25.00% 23.00% 22.50% Operating profit margin 12.50% 12.70% 12.50% Net profit margin  6.10% 6.00% 6.50% Return on total assets 8.54% 8.10% 8.91% Return on equity 20.93% 20.74% 22.28

% Income Statement for Balance Sheet Year Ended 12/31/07 Sales $1,500,000 Cash Cost of goods sold 1,200,000 Gross profit $ 300,000 Operating expenses 100,000 Operating profit $ 200,000 Interest expense Earnings before tax Income tax (0.4) Net Income 128,000 51,200 $ 76,800 72,000 at 12/31/07 Accounts receivable Inventory Current assets Fixed assets (net) Total Assets Accounts payable Notes payable Accrued liabilities Current liabilities Long-term debt Total liabilities Equity Total liabilities and equity $ 420,000 $1,145,000 $ 150,000 225,000 100,000 475,000 400,000 $ 875,000 270,000 $1,145,000 $ 125,000 275,000 325,000 $ 725,000