Consider the data for Ryan Company in Exhibit 12-15. Assume all sales are on credit.

Compute the following ration for the year 20X2 and 20X3.

Percentage of the net income to stockholders equity (ROE)

Gros profit rate

Percent of net income to sales

Ratio of total debt to stockholders equity (define total debt as total liabilities)

Inventory turnover

Current ratio

Average collection period for account receivable.

December 31

20X3 20X2 20X1

Cash $ 30 $ 25 $ 20

Accounts receivable 90 70 50

Merchandise Inventory 80 70 60

Prepaid expenses 10 10 10

Land 30 30 30

Building 70 75 80

Equipment 60 50 40

Total assets $ 370 $ 330 $ 290

Accounts Payable $ 50 $ 40 $ 30

Taxes Payable 20 15 10

Accrued expenses payable 15 10 5

Long-term debt 45 45 45

Paid-in Capital 150 150 150

Retained Earnings 90 70 50

Total Liabilities and stockholders equity $ 370 $ 330 $ 290

Year Ended December 31

20X3 20X2

Sales (all on credit) $ 800 $ 750

Costs of goods sold 435 410

Operating expenses 350 295

Pretax Income 60 45

Income taxes 20 15

Net Income $ 45 $ 30

For each of the following item, indicate whether the change from 20X2 too 20X3 for Ryan. Company seems to be favourable or unfavourable, and identity the ratios you computed previously that most directly support your answer. The first two items that follow are given as an example.

Return to owners, favourable, a

Gross profit rate basically unchanged, b (increased from 45.3% to 45.6%, could answer favourable)

Ability to pay current debt on time

Collectability of receivables

Risks of insolvency

Salability of merchandise

Return on sales

Overall accomplishment

Coordination of buying and selling functions

Screening of risks in granting credit to customer.