IntegrativeComplete ratio analysis Given the following financial statements , historical ratios, and industry averages , calculate Sterling Company's financial ratios for the most recent year. (Assume a 365-day year.) Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis into evaluations of the firm's liquidity, activity, debt, profitability, and market. The current ratio is . (Round to two decimal places.) Sterling Company Income Statement for the Year Ended December 31, 2019 Sales revenue $10,011,000 Less: Cost of goods sold 7,514,000 Gross profits $2,497,000 Less: Operating expenses Selling expense $323,000 General and administrative expenses 633,000 Lease expense 49,400 Depreciation expense 182,000 Total operating expense 1,187,400 Operating profits $1,309,600 Less: Interest expense 220,000 Net profits before taxes $1,089,600 Less: Taxes (rate=21%) 228,816 Net profits after taxes $860,784 Less: Preferred stock dividends 52,000 Earnings available for common stockholders $808,784 Earnings per share (EPS) $4.44 Sterling Company Balance Sheet December 31, 2019 Assets Liabilities and Stockholders' Equity Current assets Current liabilities Cash $208,000 Accounts payable [b] $877,000 Marketable securities 50,800 Notes payable 207,000 Accounts receivable 799,000 Accruals 107,000 Inventories 958,000 Total current liabilities $1,191,000 Total current assets $2,015,800 Long-term debt (includes financial leases) [C] $2,982,800 Gross fixed assets (at cost) [a] $11,997,000 Stockholders' equity Less: Accumulated depreciation 3,025,000 Preferred stock (27,000 Net fixed assets $8,972,000 shares, $2.00 dividend) $980,000 Common stock (182,000 Other assets $988,000 shares at $3.50 par) [d] 637,000 Paid-in capital in excess of par value 5,188,000 Retained earnings 997,000 Total stockholders' equity $7,802,000 Total liabilities and Total assets $11,975,800 stockholders' equity $11,975,800 [a] The firm has an 8-year financial lease requiring annual beginning-of-year payments of $49,400. Five years of the lease have yet to run. [b] Annual credit purchases of $6,212,000 were made during the year. [C] The annual principal payment on the long-term debt is $113,000. [d] On December 31, 2019, the firm's common stock closed at $40.29 per share. 0.20 Historical and Industry Average Ratios for Sterling Company Ratio Actual 2017 Actual 2018 Industry average, 2019 Current ratio 1.42 1.57 1.87 Quick ratio 1.01 0.93 1.06 Inventory turnover 9.47 9.16 8.55 Average collection period 45.5 days 36.8 days 35.40 days Average payment period 57.8 days 60.1 days 44.9 days Total asset turnover 0.75 0.81 0.75 Debt ratio 0.20 0.30 Times interest earned ratio 7.7 Fixed-payment coverage ratio 4.6 4.3 Gross profit margin 0.27 0.25 Operating profit margin 0.12 0.12 Net profit margin 0.082 0.082 0.073 Return on total assets (ROA) 0.062 0.067 0.057 Return on common equity (ROE) 0.090 0.096 0.095 Earnings per share (EPS) $3.14 $3.59 $2.89 Pricelearnings (P/E) ratio 8.1 6.6 7.3 Market/book (M/B) ratio 1.11 0.96 1.01 6.8 7.5 0.30 0.10 IntegrativeComplete ratio analysis Given the following financial statements , historical ratios, and industry averages , calculate Sterling Company's financial ratios for the most recent year. (Assume a 365-day year.) Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis into evaluations of the firm's liquidity, activity, debt, profitability, and market. The current ratio is . (Round to two decimal places.) Sterling Company Income Statement for the Year Ended December 31, 2019 Sales revenue $10,011,000 Less: Cost of goods sold 7,514,000 Gross profits $2,497,000 Less: Operating expenses Selling expense $323,000 General and administrative expenses 633,000 Lease expense 49,400 Depreciation expense 182,000 Total operating expense 1,187,400 Operating profits $1,309,600 Less: Interest expense 220,000 Net profits before taxes $1,089,600 Less: Taxes (rate=21%) 228,816 Net profits after taxes $860,784 Less: Preferred stock dividends 52,000 Earnings available for common stockholders $808,784 Earnings per share (EPS) $4.44 Sterling Company Balance Sheet December 31, 2019 Assets Liabilities and Stockholders' Equity Current assets Current liabilities Cash $208,000 Accounts payable [b] $877,000 Marketable securities 50,800 Notes payable 207,000 Accounts receivable 799,000 Accruals 107,000 Inventories 958,000 Total current liabilities $1,191,000 Total current assets $2,015,800 Long-term debt (includes financial leases) [C] $2,982,800 Gross fixed assets (at cost) [a] $11,997,000 Stockholders' equity Less: Accumulated depreciation 3,025,000 Preferred stock (27,000 Net fixed assets $8,972,000 shares, $2.00 dividend) $980,000 Common stock (182,000 Other assets $988,000 shares at $3.50 par) [d] 637,000 Paid-in capital in excess of par value 5,188,000 Retained earnings 997,000 Total stockholders' equity $7,802,000 Total liabilities and Total assets $11,975,800 stockholders' equity $11,975,800 [a] The firm has an 8-year financial lease requiring annual beginning-of-year payments of $49,400. Five years of the lease have yet to run. [b] Annual credit purchases of $6,212,000 were made during the year. [C] The annual principal payment on the long-term debt is $113,000. [d] On December 31, 2019, the firm's common stock closed at $40.29 per share. 0.20 Historical and Industry Average Ratios for Sterling Company Ratio Actual 2017 Actual 2018 Industry average, 2019 Current ratio 1.42 1.57 1.87 Quick ratio 1.01 0.93 1.06 Inventory turnover 9.47 9.16 8.55 Average collection period 45.5 days 36.8 days 35.40 days Average payment period 57.8 days 60.1 days 44.9 days Total asset turnover 0.75 0.81 0.75 Debt ratio 0.20 0.30 Times interest earned ratio 7.7 Fixed-payment coverage ratio 4.6 4.3 Gross profit margin 0.27 0.25 Operating profit margin 0.12 0.12 Net profit margin 0.082 0.082 0.073 Return on total assets (ROA) 0.062 0.067 0.057 Return on common equity (ROE) 0.090 0.096 0.095 Earnings per share (EPS) $3.14 $3.59 $2.89 Pricelearnings (P/E) ratio 8.1 6.6 7.3 Market/book (M/B) ratio 1.11 0.96 1.01 6.8 7.5 0.30 0.10