Five-Puddles Inc. (FPI) manufactures a variety of consumer products. The company's founders have run the company for thirty years and are now interested in retiring.

They are seeking a purchaser, and a group of investors is looking into the acquisition. To evaluate its financial stability, the company was requested to provide its latest financial statements and selected financial ratios. Summary information provided by FPI Document presented below.

• Calculate the select financial ratios for the fiscal Year 2. Use Microsoft Word(tm) or Excel(tm). The template provided with this problem will assist you, and uses Excel.
• Analyze the following ratios, as discussed below:
• Current Ratio
• Inventory Turnover
• Times Interest Earned
• Debt to Equity
• Net Income %
• Call out which of the measures fall into each category: Liquidity, Solvency, or Profitability.
• Interpret what each of these financial ratios means in terms of the companies financial stability and operating efficiency as compared to the industry average.

FPI
Statement of Income
For the year ended November 30, Year 2
Sales		$ 31,000,000
Less: Cost Of Goods Sold (COGS)	17,600,000
Gross Margin		$ 13,400,000	43.23%
Less: Selling & Administration Expenses	3,550,000
Earnings before Interest, Taxes, & Depreciation/Amortization (EBITDA)		$ 9,850,000	31.77%
Less: Depreciation	1,890,000
Earnings before Interest & Taxes (EBIT)		$ 7,960,000	25.68%
Less: Interest	900,000
Earning before Taxes		$ 7,060,000	22.77%
Less: Taxes	2,900,000
Net Income		$ 4,160,000	13.42%

FPI
Balance Sheet
As of November 30, Year 2
Assets
	Current Assets
	Cash		$ 400,000		2.35%
	Marketable Securities		500,000		2.94%
	Accounts Receivables		3,200,000		18.82%
	Inventory		5,800,000		34.12%
	Total Current Assets			$ 9,900,000	58.24%
	Noncurrent Assets
	Property, Plant & Equip.		$ 7,100,000		41.76%
				7,100,000	41.76%
	Total Assets			$ 17,000,000
Liabilities and Equities
	Current Liabilities
	Accounts Payable	$ 3,700,000			21.76%
	Income Taxes Payable	900,000			5.29%
	Accrued Expenses	1,700,000			10.00%
	Total Current Liabilities		$ 6,300,000		37.06%
	Noncurrent Liabilities
	Long Term Debt	$ 2,000,000			11.76%
			2,000,000
	Total Liabilities			$ 8,300,000	48.82%
	Equities
	Common Stock		$ 2,700,000		15.88%
	Paid In Capital Excess Of Par		1,000,000		5.88%
	Retained Earnings		5,000,000		29.41%
	Total Equities			8,700,000	51.18%
	Total Liabilities and Equities			$ 17,000,000

Industry Average

Current Ratio 1.65

Inventory Turnover 3.20

Times Interest Earned 8.68

Debt to Equity 1.01

Net Income % 0.15