Name Part II. Ratio Analysis (12 pts Total). Given the financial statements for Justin's Sport Management Solutions and Taylor's T-Shirt Innovations shown below, answer the following items on the attached answer sheet: a. Compute all ratios as indicated. (6 pts) b. To which company would you, as credit manager for a supplier, approve the extension of (short-term) trade credit? Why? (2 pts) c. In which one would you buy stock? Why? (4 pts) Justin's Sport Management Solutions (000,025) Liabilities Current Assets Cash. $ 20,000 Accounts payable. $100,000 Accounts receivable. Inventory 80,000 Bonds payable (long-term) 80,000 50,000 Stockholders' Equity Long-Term Assets Fixed assets. $ 500,000 Common stock Less: Accum. Dep... *Net fixed assets (150,000) 350,000 Paid-in capital Retained earnings. Total assets. $ 500,000 Total liab. and equity.. **** Sales (all on credit) Cost of goods sold. Gross profit *Selling and administrative expense. Less: Depreciation expense.... Operating profit..... Interest expense. Earnings before taxes. Tax expense Net income.. *Use net fixed assets in computing fixed asset turnover. *Includes $7,000 in lease payments. $150,000 70,000 100,000 $500,000 $1,250,000 750,000204 500,000 257,000 50,000 193,000 8,000 185,000 92,500 92,500 Name Taylor's T-shirt Innovations Current Assets Cash Marketable securities. Accounts receivable.. Inventory Liabilities $ 35,000 Accounts payable.. $ 75,000 7,500 Bonds payable (long-term) 210,000 70,000 75,000 Stockholders' Equity Long-Term Assets Fixed assets. $ 500,000 Common stock $ 75,000 Less: Accum. Dep......... (250,000) Paid-in capital 30,000 *Net fixed assets Total assets. 250,000 $437,500 Retained earnings. 47,500 Total liab. and equity. $437,500 Sales (all on credit) Cost of goods sold Gross profit. +Selling and administrative expense Less: Depreciation expense Operating profit Interest expense Earnings before taxes. Tax expense Net income.... *Use net fixed assets in computing fixed asset turnover. *Includes $7,000 in lease payments. $1,000,000 600,000 400,000 224,000 50,000 126,000 21,000 105,000 52,500 52,500 Name Answer Sheet: A. (6 pts) Justin's Taylor's Profit margin Return on assets (investments) Return on equity Receivable turnover Average collection period 23.35 25.55 Inventory turnover 25x 13.3x Fixed asset turnover 3.6 x 4 x Total asset turnover 2.5x 2.3 x 1.5x 2.5x Current ratio Quick ratio Debt to total assets Times interest earned Fixed charge coverage 24.125 13.3x 6x 4.8x b. To which company would you extend a short-term loan? Briefly explain using two (2) ratios to explain. (2 pts) c. In which one would you buy stock? Why? {In your answer, identify four (4) ratios you used to justify your answer} (4 pts)