1. Use the provided worksheet to calculate a set of ratios.

2. Complete the financial ratios for the company in the 2014 column.

Calculate the financial ratios below for the year 2014. Use the financial information given in the income statement and balance sheet below.

Industry Average

Financial Ratios 2012 2013 2014 2007

Current ratio 1.71X 1.65X 1.70X

Quick ratio .92X .89X .95X

Average collection period .92X 60 days 65 days

Average collection period 4.20X 3.90X 4.50X

Fixed asset turnover 3.20X 3.33X 3.00X

Total asset turnover 1.40X 1.35X 1.37X

Debt ratio 59.20% 61.00% 60.00%

Times interest earned 4.20X 3.70X 4.75X

Gross profit margin 25.00% 23.00% 22.50%

Operating profit margin 12.50% 12.70% 12.50%

Net profit margin 6.10% 6.00% 6.50%

Return on total assets 8.54% 8.10% 6.50%

Return on equity 20.93% 20.74% 22.28%

Income Statement for Balance Sheet

Year Ended 12/31/14 at 12/31/14

Sales $1,500,000 Cash $125,000

Cost of goods sold 1,200,000 Accounts receivable 275,000

Gross Profit $300,000 Inventory 325,000

Operating expenses 100,000 Current Assets $725,000

Operating profit $200,000 Fixed assets (net) $420,000

Interest expense 72,000 Total Assets $1,145,000

Earnings before tax 128,000 Accounts payable $150,000

Income tax (0.4) 51,200 Notes payable 225,000

Accrued liabilities 100,000

Current Liabilities 475,000

Long-term debt 400,000

Total Liabilities $875,000

Equity 270,000

Net Income $ 76,800 Total Liabilities & Equity $1,145,000