Financial Leverage:

j. Calculate the debt ratio and the debt/equity as of the most recent balance sheet date.

k. Based on the results of your calculations in part j, assess the companys overall leverage position. What would you estimate the industry averages to e for the debt ratio and debt/equity ratio? Explain.

l. Explain the relationship between ROI and ROE, and the concept of financial leverage. Would you expect the percentage difference between ROI and ROE to be high or low for a firm that makes substantial use of financial leverage?

m. Calculate the accounts receivable turnover and numbers of days sales in accounts receivable (based on a 365 day year) for the most recent year.

n. Based on your analysis in part m, do you believe that the company is doing an effective job at managing accounts receivable? What would you estimate the industry averages to be for the accounts receivable turnover and number of days sales in accounts receivable? Explain.

o. Calculate the inventory turnover and number of days sales in inventory (based on a 365 days year) for the most recent year.

p. Based on your analysis in part o, to what extent does the company need to be concerned about its inventory management policies? In assessing the inventory management policies, would you be more interested in knowing current ratio or acid-test ratio information? Explain.

q. Assume that you have $5,000 that you would to invest in a single company. Evaluate the common stock of the company as a potential investment. From the data available in the companys financial statements, identify the five most important criteria that you would use to make your investment decision, and explain why each is important.