Financial statements for AAR Company appear below:

AAR Company

Balance Sheet

December 31

Current assets:Cash and marketable securities$21,000Accounts receivable, net160,000Inventory300,000Prepaid expenses9,000Total current assets490,000Noncurrent assets:Plant & equipment, net810,000Total assets$1,300,000Current liabilities:Accounts payable$75,000Accrued liabilities25,000Notes payable, short term100,000Total current liabilities200,000Noncurrent liabilities:Bonds payable300,000Total liabilities500,000Shareholders' equity:Common shares, $5 par100,000Retained earnings700,000Total shareholders' equity800,000Total liabilities & shareholders' equity$1,300,000

AAR Company

Income Statement

For the Year Ended December 31

(dollars in thousands)Sales (all on account)$2,100,000Cost of goods sold

1,770,000Gross margin330,000Operating expenses130,000Net operating income200,000Interest expense50,000Net income before taxes150,000Income taxes (30%)45,000Net income$105,000

AAR Company paid dividends of $3.15 per share during the year. The market price of the company's shares at December 31 was $63 per share. Assets at the beginning of the year totalled $1,100,000, and shareholders' equity totalled $725,000. The balance of accounts receivable at the beginning of the year was $150,000. The balance in inventory at the beginning of the year was $250,000.

Required:

Compute the following:

a. Current ratio.

b. Acid-test (quick) ratio.

c. Average collection period (age of receivables).

d. Inventory turnover.

e. Times interest earned.

f. Debt-to-equity ratio.

g. Dividend payout ratio.

h. Dividend yield ratio.

i. Price-earnings ratio.

j. Return on total assets.

k. Return on common shareholders' equity.

l. Was financial leverage positive or negative for the year? Explain.