answer the following questions and use the financial statement ratios to support your answers where appropriate:

Do you feel that the company is able to meet its current and long term obligations as they become due?

Comment on the profitability of the company with respect to the various profitability ratios that you computed.

Would you lend money to this company for the long term?

Comment on the ability of the company to collect its receivables and mange inventory.

Ratios before
	2014	2015	2016	Industry Average
Liquidity
Current	2.39	2.68	2.90	3.12
Quick	1.10	1.16	1.21	1.56
Working Capital	$ 98,750.00	$ 100,450.00	$ 103,000.00	$ 110,000.00
Leverage
Debt to Total Assets (%)	20.97%	21.98%	22.89%	20.89%
Times Interest Earned	8.75	9.12	9.56	10.22
Activity
Inventory Turnover (sales)	8.21	9.91	10.12	10.52
Fixed Asset Turnover	3.43	3.51	3.59	3.64
Total Asset Turnover	2.15	2.20	2.25	2.56
Average Collection Period (days)	14.95	14.69	14.42	14.28
Accounts Receivable Turnover	24.08	24.50	24.97	25.21
Days in Inventory	44.46	36.83	36.07	43.21
Profitability
Gross Profit Margin (%)	21.10%	22.50%	24.03%	24.56%
Net Profit (%)	6.89%	7.25%	7.89%	8.03%
Return on Total Assets (%)	15.50%	16.10%	16.24%	16.07%
Return on Equity (%)	20.15%	21.89%	22.15%	22.06%
Payout Ratio (%)	15.10%	15.84%	16.09%	16.86%

Ratios after calculated

Ratios (answers are all rounded by 4 decimal places)

Current ratio = Current assets / Current liabilities

= 161000 / 59500 = 2.7059

?

Quick ratio = Cash + Accounts receivable / Current liabilities

= (34400+36600) / 59500 = 1.1933

?

Working capital = Current assets - Current liabilities

= 161000 - 59500 = 101500

?

Accounts receivable turnover = credit sales / average accounts receivable

= 881500 / (34750+36600) / 2 = 24.7092

?

Average collection period = 365 / Accounts receivable turnover

=365 / 24.71 = 14.7718

?

Inventory turnover = Cost of goods sold / Average inventory

= 693900 / (62400+90000) / 2 = 9.1063

?

Days in inventory = Number of days in the period / Inventory turnover

=365 / 9.11 = 40.0821

?

Debt to total assets ratio = Total liabilites / Total assets

= (59500+35000) / 418100 = 0.2260

?

Gross profit ratio = Gross profit / Sales

= 187600 / 881500 = 0.2128

?

Profit margin ratio = Profit / Sales

= 65800 / 881500 = 0.0746

?

Return on assets ratio = Net profit / Average total assets

= 65800 / (469225+418100) / 2 = 0.1490

?

Asset turn over ratio = Net sales / Average total assets

= 881500 / (469225+418100) / 2 = 1.9959