Compute Ratios for ABC and XYZ from the given I.S$.$ and B$.$S$.$ Please note change in instructions with red cells highlighted

$(50$ points$)$

ABC Corporation ABC Corporation

Balance Sheets $($$ in millions$)$ Income Statement $($$ in millions$)$

March $31$ March $31,2020$

$20202019$

Assets Net sales $(90\%$ of sales is on credit$)$ $$20,489$

Current assets COGS $$14,691$

Cash $$2,369$ $$902$ Gross Profit $$5,798$

current investment $1000500$ Operating expense $$3,870$

Net Receivables $$2,308$ $$1,873$ Operating income $$1,928$

Inventory $$2,294$ $$1,673$ Other expanses$*$ $$201$

Other current assets $$2,056$ $$2,225$ Income before taxes $$1,727$

Total current assets $$10,027$ $$7,173$ Income tax expense $$198$

LT assets Net income $$1,529$

Property and Equipment $($net$)$ $$1,954$ $$1,376$

Intangible assets $($net$)$ $$4,011$ $$3,899*$ includes $$92$m interest expense

Other assets $$3,141$ $$1,909$ Stock Price $$74\mathrm{.}08$

Total LT assets $$9,106$ $$7,184$ Earnings per share $$0\mathrm{.}75$

Total assets $$19,133$ $$14,357$

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable and accrued liabilities $$1,667$ $$1,615$

ST debt and current portion of LT debt $$1,230$ $$664$

Other current liabilities $$127$ $$382$

Total current liabilities $$3,024$ $$2,661$

LT liabilities

LT debt $$3,629$ $$2,116$

Other LT liabilities $$1,123$ $$1,281$

Total LT liabilities $$4,752$ $$3,397$

Stockholders' Equity $$11,357$ $$8,299$

Total Liabilities and equity $$19,133$ $$14,357$

FOR ABC CORPORATION

Ratio Analysis Framework Formula

Category $1-$ Return to Shareholders

Return on Equity $13\mathrm{.}46\%$ Net income$/$Average stockholders' Equity

Return on assets Net income$/$Average total assets

Category $2-$ Profitability

Gross Profit Ratio Gross Profit $($Net sales$-$COGS$)/$Net sales

Profit Margin Net income$/$Net sales

Category $3-$ Asset Management Ratio

Asset turnover ratio Net sales$/$Average total assets

Receivables turnover ratio Net credit sales$/$Average accounts receivables

Average collection period$*($in days$)365/$Receivable turnover ratio

Inventory turnover ratio $($use sales and not COGS$)$ COGS or Sales$/$Average inventory

Average days in inventory$($in days$)365/$Inventory turnover ratio

$*$ also called as Days sales outstanding

Category $4-$ Credit Risk Management

Current ratio Current assets$/$Current liabilities

Acid test ratio$**($Current assets$-$Inventory$)/$Current liabilities

Times interest earned ratio $($Net income$+$interest$+$income tax$)/$interest

Debt to equity ratio interest bearing debt$/$stockholders$\text{'}$ equity

$**$ also called as Quick ratio

Category $5-$Valuation

Price earnings ratio Stock price$/$earnings per share