Balance Sheet
December 31, Year 2 and Year 1
ASSETS	YEAR 2	YEAR 1
Current Assets:
	Cash	$190,000	$190,000
	Accounts Receivable	197,000	200,000
	Inventory	232,000	200,000
	Prepaid Expenses	9,000	10,000
Total Current Assets	$628,000	$600,000
Plant and Equipment, net	695,000	700,000
Total Assets	$1,323,000	$1,300,000
LIABILITES AND SHAREHOLDERS' EQUITY
Current Liabilities:
	Accounts Payable	$206,000	$200,000
	Accrued Liabilities	104,000	90,000
	Notes Payable, short term	41,000	50,000
Total Current Liabilities	$351,000	$340,000
Bonds Payable	130,000	130,000
Total Liabilities	$481,000	$470,000
Shareholders' Equity
	Common Stock, $2 par value	$160,000	$160,000
	Additional Paid-In Capital - Common Stock	70,000	70,000
	Retained Earnings	$612,000	$600,000
Total Shareholders' Equity	$842,000	$830,000
TotalLiabilitesand Shareholders' Equity	$1,323,000	$1,300,000

Income Statement
For the Year Ended December 31, Year 2
Sales (all on account)	$1,330,000
Cost of Goods Sold	740,000
Gross Margin	$590,000
Operating Expenses	555,000
Operating Income	$35,000
Interest Expense	11,000
Net Income Before Taxes	$24,000
Income Taxes	7,200
Net Income	$16,800

a. [3 points]If SMC prepared a horizontal analysis of its balance sheet, what would be the percentage change in Inventory?

b. [3 points]If SMC prepared a vertical analysis of its balance sheet, what would be the percentage reported for Inventory in Year 2?

c. [3 points]What is SMCs Acid-Test (Quick) Ratio in Year 2?

d. [3 points]What is SMCs Days Sales in Inventory in Year 2?

e. [3 points]Assume that SMC had an average of 50,000 common shares outstanding in Year 2; and no preferred shares. Calculate SMCs Earnings per Share in Year 2.

f. [3 points]Based on the information in part e, calculate SMCs Dividend Payout in Year 2.