Instructions:

1. Use the income statement and balance sheet of E 5-12 to compute the ratios on the illustration 5A-1, Page 232, and analyze it and discuss each ratio whether managers, investors, debtors or other users prefer to have the ratio higher or lower.

2. Assuming that Scott Butler Corporation is incorporated in 2017 and Scott Butler has 100,000 outstanding shares.

2. Quick or acid-test 3, Current cash debt 5. Inventory turnover 6. Asset turnover 7, Profit margin on sales 8, Return on assets 10, Earnings per share 12, Payout ratio 13, Debt to assets ratio 14, Times interest earned 15, Cash debt coverage 16. Book value per share 17. Free cash flow Measures short-term debt-paying ability Measures immediate short-term liquidity Cash Short-term investments Current liabilities Measures a company's ability to pay off its current liabilities in a given year from its Net cash provided by Average current liabilities Measures liquidity of receivables Average net accounts receivable Measures liquidity of inventory Cost of goods sold Average inventory Measures how efficiently assets are used to Average total assets Measures net income generated by each dollar Measures overall profitability of assets Measures profitability of owners' investment Net income Preferred dividends Average common stockholders' equity Measures net income earned on each share of Net income Preferred dividends Weighted average common shares outstanding Market price per share Measures the ratio of the market price per share to earnings per share Earnings per share Measures percentage of earnings distributed in the form of cash dividends Total liabilities Measures the percentage of total assets provided by creditors Net income Interest expense Measures ability to meet interest payments as they Measures a company's ability to repay its total Net cash provided by operating activities liabilities in a given year from its operations Average total liabilities Measures the amount each share would receive if the company were liquidated at the amounts reported on the balance sheet activities Net cash provided by operating dividends Measures the amount of discretionary cash fiow Capital expenditures Cash 2. Quick or acid-test 3, Current cash debt 5. Inventory turnover 6. Asset turnover 7, Profit margin on sales 8, Return on assets 10, Earnings per share 12, Payout ratio 13, Debt to assets ratio 14, Times interest earned 15, Cash debt coverage 16. Book value per share 17. Free cash flow Measures short-term debt-paying ability Measures immediate short-term liquidity Cash Short-term investments Current liabilities Measures a company's ability to pay off its current liabilities in a given year from its Net cash provided by Average current liabilities Measures liquidity of receivables Average net accounts receivable Measures liquidity of inventory Cost of goods sold Average inventory Measures how efficiently assets are used to Average total assets Measures net income generated by each dollar Measures overall profitability of assets Measures profitability of owners' investment Net income Preferred dividends Average common stockholders' equity Measures net income earned on each share of Net income Preferred dividends Weighted average common shares outstanding Market price per share Measures the ratio of the market price per share to earnings per share Earnings per share Measures percentage of earnings distributed in the form of cash dividends Total liabilities Measures the percentage of total assets provided by creditors Net income Interest expense Measures ability to meet interest payments as they Measures a company's ability to repay its total Net cash provided by operating activities liabilities in a given year from its operations Average total liabilities Measures the amount each share would receive if the company were liquidated at the amounts reported on the balance sheet activities Net cash provided by operating dividends Measures the amount of discretionary cash fiow Capital expenditures Cash