P3-1. Calculating Ratios Below are the financial statements for Mowing and Maintenance, Inc. Mowing & Maintenance, Inc. Balance Sheet as of December 31, 2017 and 2016 (in millions of dollars) Assets 2017 2016 Liabilities & Equity 2017 2016 Current assets: Current liabilities: Cash and marketable Accrued wages and securities $ 75 $ 65 taxes $ 40 $ 43 Accounts receivable 115 110 Accounts payable 90 80 Inventory 200 190 Notes payable 80 70 Total Current Assets $ 390 $ 365 Total Current Liabilities $ 210 $ 193 Fixed assets: Long-term debt: $ 300 $ 280 Gross plant and equipment $ 580 $ 471 Stockholders equity: Less: Depreciation 110 100 Preferred stock (5 million shares) $ 5 $ 5 Net plant and Common stock and equipment $ 470 $ 371 paid-in surplus 65 65 Other long-term assets 50 49 (65 million shares) Total Fixed Assets $ 520 $ 420 Retained earnings 330 242 Total Equity $ 400 $ 312 Total assets $ 910 $ 785 Total liabilities and equity $ 910 $ 785 Mowing & Maintenance, Inc. Income Statement for Years Ending December 31, 2017 and 2016 (in millions of dollars) 2012 2011 Net sales (all credit) $ 515 $ 432 Less: Cost of goods sold 230 175 Gross profits $285 $257 Less: Depreciation 22 20 Other operating expenses 30 25 Earnings before interest and taxes (EBIT) $233 $212 Less: Interest 33 30 Earnings before taxes (EBT) $200 $182 Less: Taxes 57 55 Net income $ 143 $ 127 Less: Preferred stock dividends $ 5 $ 5 Net income available to common stockholders $ 138 $ 122 Less: Common stock dividends 65 65 Addition to retained earnings $ 73 $ 57 Per (common) share data: Earnings per share (EPS) $2.123 $1.877 Dividends per share (DPS) $1.000 $1.000 Book value per share (BVPS) $6.077 $4.723 Market value (price) per share (MVPS) $14.750 $12.550 Calculate the following ratios for Mowing & Maintenance, Inc. for 2016 and 2017. Mowing & Maintenance, Inc. Industry 2017 2018 Average a. Current ratio 2.00 times b. Quick ratio 1.20 times c. Inventory turnover 3.60 times d. Days sales outstanding 101 days e. Fixed asset turnover 1.25 times f. Total asset turnover 0.85 times g. Debt ratio 62.50% h. Times interest earned 8.50 times i. Profit margin 28.75% j. ROA 19.75% k. ROE 36.88% l. Market-to-book ratio 2.55 times m. PE ratio 15.60 times Ratio Analysis

Using the ratios from P3-1 for M & M, Inc. and the industry, what can you conclude M & Ms financial performance for 2017. Discuss each ratio in terms of how they compare to the industry and which direction they are headed. Conclude with a summary.

a. Current ratio

b. Quick ratio

c. Inventory turnover ratio

d. Days sales in inventory

e. Fixed asset turnover ratio

f. Total asset turnover ratio

g. Debt ratio

h. Times interest earned

i. Profit margin

j. ROA

k. ROE

l. Market - to - book ratio

m. PE ratio