As a fi nancial analyst in the planning department for Erin Industries, Inc., you must develop ratios from the comparative fi nancial statements. This information is to be used to convince creditors that, despite a slight decline in sales, Erin Industries, Inc. is liquid, solvent, and profi table, and that it deserves their continued support. Lenders are particularly concerned about the company’s ability to continue as a going concern.

Here are the data requested and the computations developed from the fi nancial statements: LO8 2017 2016 Current ratio 3.1 2.1 Working capital Up 22% Down 7%

Free cash flow Up 25% Up 18%

Debt to assets ratio 0.60 0.70 Net income Up 32% Down 8%

Earnings per share $2.40 $1.15 Instructions Erin Industries, Inc. asks you to prepare brief comments stating how each of these items supports the argument that its fi nancial health is improving. The company wishes to use these comments to support presentation of data to its creditors. With the class divided into groups, prepare the comments as requested, giving the implications and the limitations of each item regarding Erin’s fi nancial well-being.