I need to figure out how the financial ratios in exhibit 4 for company 2 were calculated. I am stuck beginning with Day's inventory ratio.

6 7 8 9 Exhibit 4. Selected Financial Ratios (three-year average of values for 2011-2013) Company 1 2 3 4 5 LIQUIDITY RATIOS Cash & Market Sec to Total Assets 0.09 0.21 0.17 0.52 Acid Test Ratio 1.80 1.67 1.15 2.41 Current Ratio 4.02 2.32 1.54 2.61 Co 0.17 0.70 0.88 0.10 0.87 0.91 0.04 0.20 0.87 0.03 0.63 0.92 ASSET MANAGEMENT Day's Receivable Day's Inventory Asset Turnover 67.77 26.01 63.34 7.52 341.92 117.78 264.40 0.77 0.65 0.68 80.88 37.57 0.55 7.57 3,208.07 12.50 1,342.81 0.90 0.06 5.10 46.27 2.31 31.30 16.66 1.23 FINANCIAL LEVERAGE Long-term Debt to Total Assets Long-term Debt to Stockholders' Equity Coverage Ratio 0.26 0.22 0.14 0.17 0.11 0.17 0.13 0.27 0.05 0.04 0.00 0.01 0.06 0.03 0.07 0.44 0.13 0.05 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! PROFITABILITY Gross Margin Ratio Return on Sales Return on Assets Return on Equity 0.57 0.08 0.04 0.11 0.75 0.21 0.14 0.22 0.84 0.19 0.13 0.29 0.77 0.26 0.14 0.26 0.23 0.03 0.02 0.06 0.87 0.20 0.01 0.11 0.26 0.04 0.08 0.20 0.19 0.09 0.12 0.23 DUPONT ANALYSIS Return on Equity 0.11 Return on Sales 0.08 * Asset Turnover 0.47 * Leverage 2.84 Source: Standard & Poor's Capital IQ Net Advantage. 0.22 0.21 0.65 1.59 0.29 0.19 0.68 2.27 0.26 0.26 0.55 1.85 0.06 0.03 0.90 2.64 0.11 0.20 0.06 9.05 0.20 0.04 2.31 2.52 0.23 0.09 1.23 1.98 Exhibit 2. Common-Sized Income Statement (all items scaled by sales) Company 1 2 3 4 5 7 8 9 Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of Goods Sold 42.9% 30.3% 25.2% 15.6% 22.7% 77.3% 12.6% 73.6% 80.7% Gross Profit 57.1% 69.7% 74.8% 84.4% 77.3% 22.7% 87.4% 26.4% 19.3% Selling, General, & Administrative Exp. 27.1% 37.2% 33.1% 54.8% 38.0% 11.9% 38.1% 19.1% 3.8% Operating Income before Depreciation 30.1% 32.5% 41.7% 29.6% 39.3% 10.7% 49.3% 7.3% 15.5% Depreciation, Depletion & Amortization 14.3% 1.8% 13.5% 5.5% 4.3% 4.8% 3.1% 1.8% 3.9% Operating Profit 15.7% 30.8% 28.1% 24.1% 35.0% 5.9% 46.2% 5.5% 11.6% Interest Expense 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Non-Operating Income/Expense 1.0% 0.3% 1.1% 0.5% 1.0% 0.1% -13.4% 0.5% 4.9% Special Items -2.2% -0.1% -0.3% 0.1% -3.0% -0.8% -1.0% 0.0% 0.5% Pretax Income 11.7% 30.0% 28.2% 23.8% 32.4% 4.3% 31.8% 5.4% 16.8% Total Income Taxes 3.8% 9.4% 7.3% 5.1% 6.8% 1.7% 10.1% 1.7% 6.9% Income Before Extraordinary Items & Non-controlling Interest 7.9% 20.5% 21.0% 18.8% 25.5% 21.7% 3.7% 9.9% Net Income 7.7% 20.5% 21.0% 18.8% 25.5% 2.6% 20.2% 3.5% 9.5% Source: Standard & Poor's Capital IQ Net Advantage. 0.0% 2.6% Exhibit 1. Definitions of Some Key Financial Ratios LIQUIDITY RATIOS Cash & Marketable Securities to Total Assets = (Cash + Market Securities) / Total Assets Acid Test Ratio = (Cash + Market Securities + Receivables) / Current Liabilities Current ratio = Current Assets / Current Liabilities S = 365 / (Sales / Receivables) = 365 / (Cost of Sales / Inventory) = Sales / Total Assets ASSET MANAGEMENT Day's Receivable Day's Inventory Asset Turnover FINANCIAL LEVERAGE Debt to Total Assets Debt to Stockholders' Equity Coverage Ratio PS = (Total Current Debt + Long-term Debt) / Total Assets = (Total Current Debt + Long-term Debt) / Stockholders' Equity = (Operating Profit + Interest Expense) / Interest Expense PROFITABILITY Gross Margin Ratio Return on Sales Return on Assets Return on Equity DUPONT ANALYSIS Return on Equity = Gross Profit/ Sales = Net Income / Sales = Net Income / Total Assets = Net Income / Stockholders' Equity = Return on Sales * Asset Turnover * Leverage (Net Income / Sales) x (Sales / Assets) x (Assets / Stockholders' Equity) Exhibit 3. Common-Sized Balance Sheet (all items scaled by total assets) ASSETS 1 2 3 4 5 6 7 8 9 Cash & Short-Term Investments 1.4% 8.7% 21.4% 17.4% 51.9% 16.6% 10.4% 3.6% 2.8% Net Receivables 4.8% 14.2% 4.7% 11.8% 12.29% 1.9% 55.1% 3.2% 10.6% Inventories 0.4% 21.6% 5.3% 7.6% 1.3% 2.4% 3.0% 21.5% 4.5% Prepaid Expenses 0.4% 3.7% 0.0% #VALUE! 0.0% #VALUE! 0.0% #VALUE! 0.0% Other Current Assets 1.4% 3.0% 4.8% 2.3% 3.8% 2.5% #VALUE! 1.0% 1.6% Total Current Assets 8.4% 51.2% 36.1% 39.1% 69.29 23.3% 68.5% 29.3% 19.5% Gross Plant, Property & Equipment 98.2% 25.7% 79.8% 43.7% 15.9% 104.8% #VALUE! 85.0% 122.3% Accumulated Depreciation -58.3% -13.5% -46.3% -21.0% -8.8% -36.5% #VALUE! -27.3% -54.6% Net Plant, Property & Equipment 40.0% 12.2% 33.5% 22.7% 7.1% 68.3% 0.8% 57.7% 67.7% Investments at Equity 1.5% #VALUE! 1.5% #VALUE! #VALUE! 0.0% 0.7% #VALUE! 8.4% Other Investments #VALUE! #VALUE! 7.8% 17.3% 8.0% 0.3% 22.2% 0.0% 2.0% Intangibles 47.6% 34.7% 19.2% 13.8% 14.0% 6.0% 3.3% 10.1% #VALUE! Deferred Charges 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% #VALUE! #VALUE! 0.0% Other Assets 2.6% 1.9% 1.9% 7.0% 1.6% 2.1% #VALUE! 2.9% 2.4% TOTAL ASSETS 100.0% 100.0% 100,0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% LIABILITIES Accounts Payable Notes Payable & Other ST Borrowings Current Portion of LT Debt Total Current Debt Income Taxes Payable Accrued Expenses Other Current Liabilities Total Other Current Liabilities Total Current Liabilities Long Term Debt Deferred Taxes & Investment Tax Credit Other Liabilities TOTAL LIABILITIES Redeemable Non-controlling Interest EQUITY Preferred Stock - Redeemable Preferred Stock - Nonredeemable Total Preferred Stock Common Stock Capital Surplus Retained Earnings Less: Treasury Stock Common Equity Shareholders Equity--Parent Nonredeemable Non-controlling Interest STOCKHOLDERS EQUITY TOTAL TOTAL LIABILITIES & EQUITY 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 3.9% 3.5% 3.7% 3.3% 3.7% 5.3% 70.4% 18.7% 11.6% 0.0% 0.3% 0.0% 0.4% 0.0% 3.8% 3.1% 2.1% 1.5% 2.5% 1.0% 2.8% 1.1% 2.1% 0.5% 1.596 2.5% 1.4% 2.8% 4.9% 5.1% 2.7% 0.5% 0.6% 0.5% 0.5% #VALUE! 0.7% 3.0% 3.5% 9.2% #VALUE! 3.0% 5.4% #VALUE! 8.9% #VALUE! 2.5% 19.0% 18.0% 12.5% #VALUE! 0.4% 3.9% 6.0% 19.0% 20.9% 18.0% #VALUE! 9.3% 3.9% 11.9% 25.4% 26.6% 26.5% 75.3% 33.8% 21.1% 24.0% 14.7% 9.9% 14.7% 8.4% 22.2% 2.4% 11.0% 4.2% #VALUE! 15.0% 0.4% 2.3% 11.3% 17.7% 9.8% 4.2% 15.5% 8.0% 6.0% 5.3% 1.6% 14.5% 64.6% 48.7% 37.2% 55.6% 45.9% 62.1% 88.9% 59.9% 49.3% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.9% 0.0% 0.0% #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! #VALUE! 0.9% #VALUE! #VALUE! 2.4% 0.8% 0.0% 2.1% 0.0% 4.3% 0.6% 0.2% 2.9% 33.3% 1.8% 23.4% 14.4% 47.0% 6.5% 4.1% 1.6% 0.0% 11.6% 69.9% 39.3% 37.0% 7.0% 30.7% 5.7% 35.5% 103.9% -12.1% -21.2% #VALUE! -9.1% #VALUE! -3.8% -0.4% #VALUE! -58.0% 35.2% 51.3% 62.8% 44.4% 54.1% 37.9% 10.1% 37.2% 48.8% 35.2% 51.3% 62.8% 54.1% 37.9% 11.0% 37.2% 48.8% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 2.5% 1.8% 35.4% 51.3% 62.8% 44.4% 54.1% 37.9% 11.1% 39.7% 50.7% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 20