P3–25 Integrative: Complete ratio analysis Given the following financial statements

(following and on the next page), historical ratios, and industry averages, calculate Sterling Company’s financial ratios for the most recent year. (Assume a 365-day year.)

Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis into evaluations of the firm’s liquidity, activity, debt, profitability, and market.

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Sterling Company Income Statement for the Year Ended December 31, 2015 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Selling expense General and administrative expenses Lease expense Depreciation expense Total operating expense Operating profits Less: Interest expense Net profits before taxes Less: Taxes (rate = 40%) Net profits after taxes $ 10,000,000 7,500,000 $ 2,500,000 $ 300,000 650,000 50,000 200,000 $ 1,200,000 $ 1,300,000 200,000 $ 1,100,000 440,000 $ 660,000 50,000 Earnings available for common stockholders $ 610,000 Earnings per share (EPS) $3.05 Less: Preferred stock dividends