Phillipe Corporation 2015 Income Statement In Millions of Dolars Sales 4053 Cost of Goods Sold 2780 Depreciation 550 Earnings Before Interest and Taxes 723 Interest Paid 502 Taxable Income 221 Taxes (34%) 75 Net Income 146 Dividends 47 Addition to Retained Earnings 99 Philippe Corporation 2014 and 2015 Balance Sheets In Millions of Dollars 2014 2015 Assets Current Assets Cash 210 215 Accounts Receivable 355 310 Inventory 507 328 Total 1072 853 Fixed Assets Net Plant and Equipment 6085 6527 Total Assets 7157 7380 Liabilities and Owners Equity Current Liabilities Accounts Payable 207 298 Notes Payable 1715 1427 Total 1922 1725 Long Term Debt 1987 2308 Owners Equity Common Stock 1000 1000 Retained Earnings 2248 2347 Total 3248 3347 Total Liabilities and Owners Equity 7157 7380

1. Current and Quick Ratios If a firm increases its quick ratio but the current ratio does not change, what has happened? Has the liquidity of the company improved?

2. Ratios and Firm Health Explain whether an increase in each of the following ratios means the firm is doing better or worse and why: times interest earned, inventory turnover, days sales in receivables, total asset turnover, profit margin, return on assets.