Has the financial condition of the company changed during the four-year period?

10 Intrecductory Kncies EXHIBIT 1 1995 $32,513 1999 Net sales Consolid Ststements for Years Cost of goods sold Eading December 31, Gross profit $48,769 29,700 $19,069 16,541 $13,330 10,758 1995 and 1999 Operating expenses bosands of dllan) incme before taves .2112011 Federal income taxes 1,040 EXHIBIT 2 Magnetroslcs, Inc Consolidated Balance Sheets at December 31, 1995 and 1999 (thossands of dollars) 1995 1999 S 2,020 Cash Accounts receivable s 1,617 5,227 7.380 Inventones Current assets 0,876 Net fixed assets Total assets 5,160 1,213 2,820 3,498 Notes payable, banks Accounts payable Accrued expenses and taxes Current liabilities Long-term debt Stockholders' equity Total lablites and stockholders' equity 5 864 028 2,750 3,056 12,193 7,692 is a list of what the business owns (its assets), what it owes (its liabilities), and what has been invested by the owners (owners' equity) at a specific point in time, e.g. a December 31, 1999. Prom figures found on the income statement and the balance sheet, one can calcu late the following types of financial ratios: 1. Profitability ratios 2. Activity ratios 3. Leverage ratios 4. Liquidity ratios Profitability Ratios: How Profitable Is the Company? Profitability is a necessity over the long run, for the level of profitability strongly influ- ences (1) the company's access to debt finance, (2) the valuation of the company's common stock, (3) the company's willingness to issue common stock, and (4) the com- pany's sustainable growth rate. One measure of the profitability of a business is profit of sales, as determined by the profitability ratio equation: Net profit after taxes Net sales