1. Compute and Interpret financial ratios that managers use to assess liquidity. 2. Compute and interpret financial ratios that managers use for asset management purposes. 3. Compute and interpret financial ratios that managers use for debt management purposes. 3 4 Al fx Recent financial statements for Zimmer, Inc. are as follows: B C A Recent financial statements for Zimmer, Inc, are as follows: Zimmer Company Comparative Balance Sheet 5 Assets This Year Last Year E F G H Zimmer Company Income Statement This Year 6 Current assets 7 Cash 360,000 $310,000 Sales (all on account) 8 Marketable securities 220,000 80,000 Cost of goods sold $4,980,000 2.988.000 9 Accounts receivable, net 775,000 700,000 Gross margin 1992,000 10 Inventory 925,000 11 Other current assets 355.000 195,000 750,000 Selling and administrative expenses Operating expenses 985,500 12 Total current assets 2.635,000 2035,000 13 Plant and equipment, bet 1975,000 1,800,000 Depreciation and amortization General and administrative expenses 410,500 150.000 14 Other assets 75.000 100,000 Total selling and administrative expenses 1,546,000 15 Total assets 16 Liabilities and Stockholders' Equity 17 Current Liabilities: 45.000 1.915.000 Net operating income 446,000 Interest expense 60,000 Net income before taxes 386,000 18 Accounts payable . S 250,000 $225,000 Income taxes 135.100 19 Short-term bank loans 750,000 600,000 Net income $230.900 20 Accrued payables 550,000 395,000 21 Other current liabilities 275.000 223 400 Additional information: 22 Total current liabilities 1,825,000 1443,400 Dividend per share paid in current year 1.00 23 Bonds payable, 10% 575.000 24 Total liabilities 2.400.000 400,000 1843.400 Market price of shares at year end 42.00 Par value of common stock per share 20.00 25 Stockholders' equity 26 Common stock 1,150,000 1,150,000 Number of shares outstanding 27 Retained earnings 1.135.000 941,600 28 Total stockholders' equity 2.285.000 2.091.600 29 Total liabilities and stockholders' equity 4685.000 3.915.000 + 31 Required: 32 Compute the following ratios for the current year only: 33 Gross margin percentage 34 Current ratio (rounded to two decimal places) 35 Acid-test ratio (rounded to two decimal places) 37 36 Accounts receivable turnover (rounded to two decimal places) Average collection period (rounded to the nearest whole day) 38 Inventory turnover ratio (rounded to two decimal places) 39 Average sales period (rounded to the nearest whole day) 40 Debt-to-equity ratio (rounded to two decimal places) 41 Times interest earned (rounded to two decimal places) 42 Book value per share (rounded to two decimal places) 43 Earnings per share (rounded to two decimal places) 44 Dividend payout ratio (rounded to three decimal places) 45 Dividend yield ratio (rounded to three decimal places) 46 Price-earnings ratio (rounded to two decimal places) 47