Case 4 (0.5 Mark) The following information is available for the McCartney Corporation: Sales ......... $750,000 Cost of goods sold. 450,000 Gross profit ............. 300,000 Operating income.... 85,000 Net income ........ 42,000 Inventory, beginning-year.. 71,200 Inventory, end-of-year .. 48,800 Required: Calculate the company's a) inventory turnover and b) its days' sales in inventory c) Comment why the ratio is favorable or unfavorable. Case 5 (1 Mark) Information from a manufacturing company's current year income statement is as follows. Calculate the company's (a) profit margin ratio, (b) gross margin ratio, and (c) times interest earned. Comment if the ratios are favorable or unfavorable. Formula: (a) profit margin ratio = Net Income / sales (b) gross margin ratio = Gross margin / sales (c) times interest earned = Operating income / Interest expense Sales ..... Cost of goods sold.......... Gross profit ........ Operating expenses .... Operating income.... Interest expense......... Income before taxes .... Income taxes expense Net income ....... $800,000 455,000 $345,000 265,000 $ 80,000 32,000 $ 48,000 12,400 $ 35,600 Case 6 (0.5 Mark) A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year. At year-end, the price per share of the company's stock was $49.40. Required: a) Calculate the company's year-end price-earnings ratio. b) Comment why is the ratio favorable or unfavorable. Formula P/E Ratio = Price of the stock /Earnings per share Earnings per share = (Net income preference dividends) / shares outstanding