1. Harrods has superior sales to total assets ratio compared to the industry. For 20XX, compute ratios 34a, 35a and 37a as described in the text and compare them to industry data to see why this is so. Write a brief one-paragraph description of the results. Note: for ratio 4, only half the sales are on credit terms.

2. Conclusion: Based on your analysis in answering Questions 4 and 5, do you think that Becky Harrod has a legitimate complaint about being charged 2 percent over prime instead of one percent over prime? There is no absolute right answer to this question, but use your best judgment.

	Figure 1
		Harrods Sporting Goods Income Statement (20XV-20XX)
			20XV	20XW	20XX
		Sales.........................................................	$4,269,871	$4,483,360	$5,021,643
		Cost of goods sold.........................................................	2,991,821	2,981,434	3,242,120
		Gross Profit.........................................................	$1,278,050	$1,501,926	$1,779,523
		Selling and administrative expense.........................................................	865,450	1,004,846	1,175,100
		Operating profit.........................................................	$412,600	$497,080	$604,423
		Interest expense.........................................................	115,300	122,680	126,241
		Extraordinary loss.........................................................			170,000
		Net income before taxes.........................................................	297,300	374,400	308,182
		Taxes.........................................................	104,100	131,300	107,864
		Net income.........................................................	$ 193,200	$ 243,100	$ 200,318
Figure 2
	Harrods Sporting Goods Balance Sheet (20XV-20XX)
		20XV	20XW	20XX
	Cash..........................................................	$ 121,328	$ 125,789	$ 99,670
	Marketable securities..........................................................	56,142	66,231	144,090
	Accounts receivable..........................................................	341,525	216,240	398,200
	Inventory..........................................................	972,456	1,250,110	1,057,008
	Total current assets..........................................................	$1,491,451	$1,658,370	$1,698,968
	Net plant and equipment..........................................................	1,678,749	1,702,280	1,811,142
	Total assets..........................................................	$3,170,200	$3,360,650	$3,510,110
	Liabilities and Shareholders Equity
	Accounts payable..........................................................	$ 539,788	$ 576,910	$ 601,000
	Notes payable..........................................................	160,540	180,090	203,070
	Total current liabilities..........................................................	$700,328	$757,000	$804,070
	Long-term liabilities..........................................................	1,265,272	1,292,995	1,372,240
	Total liabilities..........................................................	$1,965,600	$2,049,995	$2,176,310
	Common stock..........................................................	367,400	368,000	368,000
	Retained earnings[*]..........................................................	837,200	942,665	965,800
	Total shareholders equity..........................................................	1,204,600	1,310,655	1,333,800
	Total liabilities and shareholders equity..........................................................	$3,170,200	$3,360,650	$3,510,110

Figure 3
Harrods Sporting Goods
Selected Industry Ratios for 20XX
1.	Net income/Sales	4.51%
2a.	Net income/Total Assets	5.10%
2b.	Sales/Total Assets	1.33
3a.	Net income/Shareholders Equity	9.80%
3b.	Debt/Total Assets	0.48
4.	Sales/Receivables	5.75
5.	Sales/Inventory	3.01
6.	Sales/Capital Assets	3.20