Hard Rock Cos Income statement

	2017	2016
Sales	7,250,000	6,750,000
Cost of Goods Sold	5,400,000	5,330,000
Gross Profit	1,850,000	1,420,000
Selling and G&A Expenses	965,000	632,000
Depreciation	550,000	550,000
EBIT	335,000	238,000
Interest Expense	130000	110,000
Earnings Before Taxes	205,000	128,000
Taxes	71,750	48,900
Net Income	133,250	79,100
Notes:
Tax Rate	0.35	0.382
Shares Outstanding	75,000	65,000
Earnings per Share	1.78	1.22
Dividends per Share	0.89	0.73
Addition to RE per Share	0.89	0.49
Dividend Payout Ratio	50%	60%

Hard Rock Cos Balance Sheet

Assets	2017	2016
Cash	149,970	100,000
Accounts Receivable	370,000	347,000
Inventory	870,000	515,000
Total Current Assets	1,389,970	962,000
Plant & Equipment	6,570,000	5,010,000
Accumulated Depreciation	1,930,000	1,380,000
Net Fixed Assets	4,640,000	3,630,000
Total Assets	6,029,970	4,592,000
Liabilities and Owners' Equity
Accounts Payable	420,000	321,440
Notes Payable	166,625	22,960
Total Current Liabilities	586,625	344,400
Long-term Debt	1,350,000	918,400
Total Liabilities	1,936,625	1,262,800
Common Stock	2520000.00	2043440.00
Additional Paid-in-Capital	772000.00	551040.00
Retained Earnings	801345.00	734720.00
Total Shareholder's Equity	4,093,345	3,329,200
Total Liab. and Owners' Equity	6,029,970	4,592,000

1. Calculate all the financial ratios.
2. Identify at least two areas of potential concerns using the financial ratios. Identify at least two

areas that have shown improvement using the financial ratios.

3. In 2017 the ROE increased. Using the DuPont analysis to explain what leads to the increase

in ROE. Using the extended DuPont analysis to explain what leads to the increase

in ROE.

4. Calculate the economic profit for both years and compare it to net income. The WACC is 10%.
5. Hard Rock Co. is a public firm. The stock prices at the end of 2017 and 2016 are $80 per share and

$70 per share, respectively. Calculate its Z-scores in 2017 and 2016, respectively.

Does it appear the firm is in imminent danger of bankruptcy?