A. How would you interpret a current ratio of 0.8? (2 points)

B. Is it good or bad for the firm? (2 points)

C. What information you would need to extra to interpret it? (1 points)

Use this information for New Tech Company to answer the following question. You may (or may not) need to fill in missing information.

C. What information you would need to extra to interpret it? (1 points)

2010 2012 NEW TECH COMPANY Income Statement Sales Cost of goods sold Depreciation General, sales & admin expenses Taxes Net Income 100 50 20 70 2011 110 51 20 65 120 52 20 60 . 10 10 10 2010 2011 40 45 60 55 2012 40 60 Balance Sheet Current Assets Property, plant & equipment Total Assets Current Liabilities Long-Term Liabilities 40 10 40 10 35 15 50 50 50 Equity Total Liabilities & Equity INDUSTRY AVERAGE RATIOS 2010 2011 2012 CR (Current Ratio) 1.5 1.5 1 DR (Debt Ratio)=TL/TA 60% 60% 60% TAT (Total Asset 2 22 2.5 Turnover) PM (Profit Margin) 4% 5% 6% Sales Growth 3% 2.50% 3% Profit Growth 5% 25% 20% Which of the following items characterize New Tech Company? (It may be more than one option). EXPLAIN (and report your calculations) (15 points) 1. High debt & unprofitable 2. Low debt & unprofitable 3. Decreasing profit margin 4. High Asset Utilization Performance 5. Low Asset Utilization Performance 6. Increasing sales with a decreasing sales growth rate 7. 1, 3 and 5 characterize New Tech Company