Gardems was recently hired as a financial analyst by Taylor, Inc., which is a Pennsylvania based company. His first task is to conduct a financial statement analysis of firm covering the past 2 years as in the table below:

Balance Sheets	2012	2011
Cash	$52,000	$57,000
Accounts Receivable	$402,000	$351,200
Inventory	$836,000	$715,200
Total Current Assets	$1,290,000	$1,124,000
Gross Fixed Assets	$527,000	$491,000
Less: Accumulated Depriciation	$166,200	$146,200
Net Fixed Assets	$360,800	344,800
Total Assets	$1,650,800	$1,468,800
Accounts Payable	$175,200	$145,600
Notes Payable	$225,000	$200,000
Accruals	$140,000	$136,000
Total current liabilities	$540,200	$481,600
Long-term debt	$424,612	$323,432
Common Stock	$460,000	$460,000
Retained Earnings	$225,988	$203,768
Total Equity	$685,988	$633,768
Total Claims	$1,650,800	$1,468,800
INCOME STATEMENTS
Sales	$3,850,000	$3,432,000
Cost of Goods Sold	$3,250,000	$2,864,000
Other expenses	$430,300	$340,000
Depreciation	$20,000	$18,900
EBIT	$149,700	$209,100
Interest expense	$76,000	$62,500
Taxes (40%)	$29,480	$58,640
Net Income	$44,220	$87,960
OTHER DATA
December 31 stock price	$6.00	$8.50
Number of Shares Outstanding	100,000	100,000
Dividend per Share	$0.22	$0.22
Annual Lease Payment	$40,000	$40,000
Earnings per Share	$0.442	$0.880

Gardems also developed the following industry average data for 2012:

Ratio	Industry Average
Current	2.7
Quick	1.0
Inventory Turnover	7.0
Days sales outstanding (DSO)	32.0 days
Fixed asset turnover	10.7
Total asset turnover	2.6
Debt ratio	50.0%
Times Interest Expense	2.5
Profit margin	3.5%
Basic earning power	19.1%
ROA	9.1%
ROE	18.2%
P/E	14.2

How should Gardems interpret this financial information? Gardems is thinking along the following lines on this case

a. Prepare an executive summary of your findings.

b. Prepare a statement of cash flows for the firm for 2012.

c. Assess the firm's liquidity position.

d. How do the firm's asset management ratios stack up against the industry averages?

e. Calculate firm's profitability ratios.

f. Apply the Du Pont analysis to 2012 and 2011 data to obtain a general overview of the firm's financial condition.