Comparison with Industry Averages

Heartland Inc. is a medium-size company that has been in business for 20 years. The industry has become very competitive in the last few years, and Heartland has decided that it must grow if it is going to survive. It has approached the bank for a sizable five-year loan, and the bank has requested Heartland's most recent financial statements as part of the loan package.

The industry in which Heartland operates consists of approximately 20 companies relatively equal in size. The trade association to which all of the competitors belong publishes an annual survey of the industry, including industry averages for selected ratios for the competitors. All companies voluntarily submit their statements to the association for this purpose.

Heartland's controller is aware that the bank has access to this survey and is very concerned about how the company fared this past year compared with the rest of the industry. The ratios included in the publication and the averages for the past year are as follows:

Ratio	Industry Average
Current ratio	1.25
Acid-test (quick) ratio	0.73
Accounts receivable turnover	39.04	times
Inventory turnover	28.97	times
Debt-to-equity ratio	0.49
Times interest earned	8.64	times
Return on sales	6.53	%
Asset turnover	1.9	times
Return on assets	12.84	%
Return on common stockholders equity	17.63	%

The financial statements to be submitted to the bank in connection with the loan follow.

Heartland Inc. Statement of Income and Retained Earnings For the Year Ended December 31, 2016 (thousands omitted)
Sales revenue		$542,805
Cost of goods sold		(435,680)
Gross profit		$107,125
Selling, general, and administrative expenses		$(65,840)
Loss on sales of securities		(205)
Income before interest and taxes		$41,080
Interest expense		(9,370)
Income before taxes		$31,710
Income tax expense		(12,684)
Net income		$19,026
Retained earnings, January 1, 2016		58,180
		$77,206
Dividends paid on common stock		(11,541)
Retained earnings, December 31, 2016		$65,665

Heartland Inc. Comparative Statements of Financial Position (thousands omitted)
		December 31, 2016		December 31, 2015
Assets
Current assets:
Cash		$1,040		$805
Marketable securities		1,205		2,180
Accounts receivable, net of allowances		15,750		12,420
Inventories		12,765		15,910
Prepaid items		400		345
Total current assets		$31,160		$31,660
Long-term investments		$430		$335
Property, plant, and equipment:
Land		$31,920		$31,920
Buildings and equipment, net of accumulated depreciation		216,035		205,960
Total property, plant, and equipment		$247,955		$237,880
Total assets		$279,545		$269,875
Liabilities and Stockholders Equity
Current liabilities:
Short-term notes		$8,800		$12,675
Accounts payable		20,030		14,445
Salaries and wages payable		1,885		2,465
Income taxes payable		3,070		2,015
Total current liabilities		$33,785		$31,600
Long-term bonds payable		$79,995		$79,995
Stockholders equity:
Common stock, no par		$100,100		$100,100
Retained earnings		65,665		58,180
Total stockholders equity		$165,765		$158,280
Total liabilities and stockholders equity		$279,545		$269,875

Required:

1. Prepare a columnar report for the controller of Heartland Inc. comparing the industry averages for the ratios published by the trade association with the comparable ratios for Heartland. For Heartland, compute the ratios as of December 31, 2016, or for the year ending December 31, 2016, whichever is appropriate. Round each ratio for Heartland, Inc. to match the rounding used for each of the industry averages presented.

Heartland, Inc.
Comparison to Industry Averages
For the year ending December 31, 2016
Ratio	Industry Average	Heartland Inc.
Current ratio	1.25
Acid-test (quick) ratio	0.73
Accounts receivable turnover	39.04 times
Inventory turnover	28.97 times
Debt-to-equity ratio	0.49
Times interest earned	8.64 times
Return on sales	6.53 %
Asset turnover	1.9 times
Return on assets	12.84 %
Return on common stockholders' equity	17.63 %