2. Question: RATIOS (Total: 35 marks) The following are the financial statements of MANDM, for the Years Ended December 31, 2015 - 2016: MANDM Corporation Balance Sheets December 31, 2015 through December 31, 2016 2016 2015 Assets Cash $72,000 $65,000 Accounts receivable 338,000 232,000 Inventories 894,000 813,000 Prepaid expenses 101,000 96,000 132,000 95,200 142,800 61,000 $1,836,000 133,000 108,400 162,600 57,000 $1,667,000 Machinery Building Land Office equipment Total assets Llabilities and Stockholders' Equity Accounts payable Salaries payable Wages payable Accrued expenses Notes payable. Current Loan payable-Non-Current Bonds payable. Non-current Common stock/share capital Retained earnings Total liabilities and Stockholders' Equity $259,200 129,600 43,200 170,000 80,858 202,145 121,287 575,000 254,710 $1,836,000 $245,700 122,850 40,950 162,000 51,781 129,449 77,668 575,000 261,602 $1,667,000 MANDM Corporation Income Statements December 31, 2015 through December 31, 2016 2016 2015 Sales $4,240,000 $3,635,000 Cost of goods sold 3,680,000 2,980,000 Gross profit $560,000 $655,000 Operating expenses 236,320 213,550 Depreciation expense 159,000 154,500 EBIT $164,680 $286,950 Interest expense 134,000 127,000 EBT $30,680 $159,950 Taxes (40%) 12,272 63,980 Net income $18,408 $95,970 EBIT: Earnings before interest and tax; EBT, Earnings before tax 2.1 Compute the following ratios for the years 2016 and 2015; fill in the following table to one decimal place: (27 marks) # Ratios / Year MANDM 2016 MANDM 2015 Industry Financial Ratios 2.7 a) Current ratio 1 7 b) Quick ratio c) Inventory turnover d) Days sales outstanding (DSO) 32.0 days e) Total assets turnover 2.6 f) Debt ratio 50.00% 8) Time Interest Earned (TIE) 4 Return on Assets (ROA) 9.10% i) Return on Equity (ROE) 18.20% Please note that Industry average ratios have been constant for the past 4 years. Calculation is based on a 365-day year. 2.2 Assess MANDM liquidity position and determine how it compares with the industry and how the liquidity position has changed over time. (8 marks)