Liquidity and Leverage Ratios (LO 9.8) Refer to the financial statements of Eikner, Inc. in Problem 30. Required: (a) Compute the liquidity and leverage ratios discussed in this chapter for Eikner, Inc. for 2006 through 2008. (12) [T1] Overall, did the company's liquidity improve or deteriorate between 2006 and 2008? Explain. (2) Did this company become more or less leveraged between 2006 and 2008? (b) Compute the activity ratios discussed in this chapter for Eikner, Inc. for 2007 and 2008. (1) Indicate which of these ratios improved and which deteriorated between 2006 and 2008. (2) Overall, did the company do a better job of managing its accounts receivable, inventory, and total assets in 2008 compared with 2007? Explain. (c) Compute the profitability and market strength ratios discussed in this chapter for Eikner, Inc. for 2006 through 2008. (Note: The company had total assets on January 1, 2006, of $425,000, while the company's total stockholders' equity on that date was $186,000.) (1) Evaluate the company's profitability ratios for the period 2006-2008. Did the company become more or less profitable over this time period? Explain. (2) Evaluate the company's market strength ratios for the period 2006-2008. What do the changes in these ratios over this period indicate? [T1]Typo error (1) Sales* Cost of goods Sold Gross Profit Operating Expenses Elkar, Inc. Income Statements For the Years Ended December 31, 2006-2008 Operating Income Other Revenue (Expense)** Income before Income Tax Income Tax Expense Net Income "All of the company's sales are credit 2006 2007 2008 $641,900 $652,000 $654,500 (304,500) (323,700) (339,200) $337,400 $328.300 $315,300 154.200 (155,600) (161,900) $183,200 $172,500 $153,400 13,400 (6,400) $196,600 $166,100 (1,200) $152,200 78,600) (66,400) (60,900) $118.000 $.99.700 $ 91.300 **aclades interest expense of the flowing at $8,900 (2000); $7,400 (2001); and $7,100 (2002). Eiker, Inc. Balance Sheets December 31, 2006-2008 2006 2007 2008 ASSETS Cash Accounts Receivable (aet) Inventory Prepaid Expenses Total Current Assets Other Assets Total Assets $ 22.000 72,500 $ 9,100 103,300 $ 3,700 116,900 109,800 102,000 89,000 2500 1,400 1,700 Property & Equipment (net) $206,500 $215,800 $211,300 212,000 201,500 189,400 1,200 $422.000 2,600 $419.900 1,500 $402.2008 LIABILITIES Accounts Payable Notes Payable Accrued Liabilities $51.900 25,000 41.100 $57,200 $ 64,900 Total Current Liabilities Bonds Payable Total Liabilities $118,000 100,000 $218,000 15,000 35,800 $108,000 $84.300 12,000 7,400 80,000 $188,000 80,000 $164,300 STOCKHOLDERS' EQUITY Common Stock $ 50.000 $ 50,000 $ 50,000 Additional Paid-in Capital Retained Earnings 130,000 24,000 130,000 51,900 130,000 57,900 Total Stockholders' Equity $204,000 $231,900 $237,900 Total Liabilities and Stockholders' Equity $422.000 $419.900 $402.200 After solving all parts, answer the following multiple choice question: What is the company's 2008 LT Debt to Equity ratio? 0.3 0.4 0.5 2.0