Assume you are a mid$-$level executive at Automotive Solutions Inc., and you have been assigned to analyze the company$$s financial statements for $20$Y$7$ and $20$Y$8$ and prepare a report for upper$-$level organizational leaders.

The following tables show the comparative financial statements for Automotive Solutions Inc. The market price of Automotive Solutions Inc. common stock was $$119$ on December $31,20$Y$8.$ The market price of Automotive Solutions Inc. common stock was $$103$ on December $31,20$Y$7.$

AUTOMOTIVE SOLUTIONS INC.

Comparative Statement of Stockholders' Equity

For the Years Ended December $31,20$Y$8$ and $20$Y$7$

$20$Y$820$Y$7$

Preferred stock Common stock Retained Earnings Preferred stock Common stock Retained Earnings

Balances, Jan. $1$ $$500,000$ $$500,000$ $$5,375,000$ $$500,000$ $$500,000$ $$4,545,000$

Net income $900,000925,000$

Dividends:

Preferred stock $(45,000)(45,000)$

Common stock $\_\_\_\_\_\_\_\_\_\_\_\_\_\_(50,000)\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_(50,000)$

Balances, Dec. $31$ $$500,000$ $$500,000$ $$6,180,000$ $$500,000$ $$500,000$ $$5,375,000$

AUTOMOTIVE SOLUTIONS INC.

Comparative Income Statement

For the Years Ended December $31,2018$ and $20$Y$7$

$20$Y$820$Y$7$

Sales $$10,000,000$ $ $9,400,000$

Cost of goods sold $(5,350,000)4,950,000)$

Gross profit $ $4,650,000$ $ $4,450,000$

Selling expenses $$(2,000,000)$ $$(1,880,000)$

Administrative expenses $(1,500,000)(1,410,000)$

Total operating expenses $ $(3,500,000)$ $$(3,290,000)$

Operating income $ $1,150,000$ $ $1,160,000$

Other revenue and expense:

Other revenue $150,000140,000$

Other expense $($interest$)(170,000)(150,000)$

Income before income tax $ $1,130,000$ $ $1,150,000$

Income tax expense $(230,000)(225,000)$

Net income $ $900,000$ $ $925,000$

AUTOMOTIVE SOLUTIONS INC.

Comparative Balance Sheet

December $31,20$Y$8$ and $20$Y$7$

Dec. $31,20$Y$8$ Dec. $31,20$Y$7$

Assets

Current assets:

Cash $ $500,000$ $ $400,000$

Marketable securities $1,010,0001,000,000$

Accounts receivable $($net$)740,000510,000$

Inventories $1,190,000950,000$

Prepaid expenses $2,50,000229,000$

Total current assets $$3,690,000$ $$3,089,000$

Long$-$term investments $2,350,0002,300,000$

Property, plant, and equipment $($net$)3,740,0003,366,000$

Total assets $$9,780,000$ $$8,755,000$

Liabilities

Current liabilities $ $900,000$ $ $880,000$

Long$-$term liabilities:

Mortgage note payable, $10\%$ $ $200,000$ $ $0$

Bonds payable, $10\%1,500,0001,500,000$

Total long$-$term liabilities $$1,700,000$ $$1,500,000$

Total liabilities $$2,600,000$ $$2,380,000$

Stockholders' Equity

Preferred $$0\mathrm{.}90$ stock, $$10$ par $ $500,000$ $ $500,000$

Common stock, $$5$ par $500,000500,000$

Retained earnings $6,180,0005,375,500$

Total stockholders' equity $$7,180,000$ $$6,375,000$

Total liabilities and stockholders' equity $$9,780,000$ $$8,755,000$

A$.$Compute a minimum of three profitability ratios for the years ended Dec $31,20$Y$8$ and Dec. $31,20$Y$7$ and show your supporting calculations. Use the same three profitability ratios for both years.

B$.$Analyze the ratios computed and discuss any insights or conclusions that can be drawn from your analysis.