Cross Sectional Ratio Analysis: Column 4 of Table 5 was calculated using the U.S. Republic Corporation balance sheet and income statement.

a. (9 points) Using the industry average of the rms performance to compare, cross-sectionally evaluate the companys performance in 2013 by indicating whether the rms current performance is either favorable(F) or unfavorable(U). You are analyzing the rm from the perspective of an outside investor who does not hold shares in the company.

b. (1 point) Evaluate the overall position of the company as either favorable or unfavorable for investment based on the three strongest ratios in Table 5, which you select to support your position.

Table 5 U.S. Republic Corporation

Cross-Sectional Industry Evaluation

Ratio Analysis 2011 2012 2013 2013 F or U

1. Current ratio 250% 200% 162.5% 225%

2. Acid-test ratio 100% 90% 75% 110%

3. Receivables

turnover 5.0 4.5 3.3 6.0

4. Inventory turnover 4.0 3.0 4.1 4.0

5. Long-term debt to

capitalization 35% 40% 54% 33%

6. Gross prot margin 39% 41% 39% 40%

7. Net prot margin 17% 15% 10% 15%

8. Rate of return on

equity 15% 20% 22% 20%

9. Return on tangible

assets 15% 12% 13% 10%

10. Tangible asset

turnover 0.9 0.8 1.3 1.0

11. Overall interest

coverage 11 9 6 10

12. Cash ow to long-

term debt 0.66 0.59 0.48 0.60