1. Calculate the 2017 profit margin, basic earning power (BEP), return on assets (ROA), and return on equity (ROE). What can you say about these ratios?

Profit margin (PM)= NI/Sales=253,584/7,035,600=3.60%

Basic earning power (BEP)= EBIT/Total Assets=502,640/3,516,952=14.29%

Return on assets (ROA)= NI/Total assets= 253,584/3,516,952=7.21%

Return on equity (ROE)= NI/Common equity=253,584/1,977,152=12.83%

PM,BEP,ROA and ROE are all below industry average, but are better than 2015 and 2016.

Performances have been improved. However, more improvement needs to be done.

Profit margin on sales ratio is the profit per dollar of sales. Basic earning power shows the raw earning power of the firms assets, and removes effect of taxes and financial leverage. ROA and ROE is lowered by interest payment, but ROE would increase if equity is lowered more than net income by debt.

2. Calculate the 2017 price/earnings ratio, price/cash flow ratio, and market/book ratio. Do these ratios indicate that investors are expected to have a high or low opinion of the company?

Price/earning ratio ( P/E)= price per share/ EPS=12.17/1.014=12.00

Price/cash flow ratio (P/CF)=price per share/cash flow per share

= price per share x shares out. = 12.17 x 250,000 =8.14

( NI+DEPR.) (253,584+120,000)

Market/book ratio(M/B)=MKT. price per share/book value per share=12.17/7.909=1.54

These ratios indicate that investors are expected to have a high opinion of the company, because P/E and M/B are both below industry average but are better than last year.