1. Based on the financial statements of Brown Company, calculate the following ratio for 2009. (please note you should not use 2007 values for calculation)

a.) Profitability ratios: return on equity; return on assets; profit margin; gross profit margin; and general overhead ratio;

b.) Solvency ratios: Debt to equity; leverage multiplier; quick ratio; current ratio; times interest earned ratio;

c.) Activity ratios: Asset turnover; working capital turnover; inventory turnover; account receivable collection period; account payable collection period;

d.) Using the DuPont method, identify the components that contribute most to the observed change in Browns return on equity from 2007 to 2009. State the reasons for the observed change.

e.) Evaluate the companys bankruptcy risk using Z-score.

Income Statement Balance Sheet Year Ending December 31 as of December 31 2007 2009 S 12,000 S 19,000 Assets Sales Cost of good sold S 2000 S 2200 7,200 12,000 Cash 3,000 3500 Depreciation expense 1,200 1,500 Accounts receivable Seling & General Administrative expense 7000 1,000 Inventory 4000 4200 S 9,000 S 9900 Interest expense 1,300 1.200 Current assets Income before taxes S 1,600 S 3,300 Fked assets at cost 24.300 Income tax expense 7000 1,440 Accumulated depreciation (9.000 10.5 900 1,860 Net Income Net fixed assets 13.000 13.900 Total assets S 22,000 S 23,700 Liabilities and Equity 1600 S 1,760 Accrued expenses Accounts payable 2400 2.640 Current liabilities S 4000 S 4400 Long-term debt 15,000 15,004 Common stock 2,000 2300 Retained earnings 1.000 1996 Total liabilities and equity S 22,000 S 23,700