2.

(@ What is Polly Corporation's current ratio? If the current ratio averages 2.5

in Polly's industry, is Polly liquid?

3. (@ Compute two measures of financial leverage for Polly Corporation and

interpret them.

Balance Sheet for Polly Corporation (in millions) Assets Cash and marketable securities $ 150 Accounts receivable 320 Inventories 430 Net fixed assets 700 Total assets $1600 Liabilities and Shareholders' Equity Accounts payable $ 350 Short-term debt 100 Long-term debt 300 Shareholders' equity 850 Total liabilities and shareholders' equity $1600 Income Statement for Polly Corporation (in millions) Revenue $4500 Cost of goods sold 2800 Gross profit 1700 Operating expenses 1200 Earnings before interest costs and taxes (EBIT) 500 Interest 50 Earnings before taxes $ 450 Taxes 200 Earnings after taxes 250 2. What is Polly Corporation's current ratio? If the current ratio averages 2.5 in Polly's industry, is Polly liquid? Compute two measures of financial leverage for Polly Corporation and interpret them. 3