prepare and show all work for finding all financial ratios for both the company and industry.

Watson Leisure Time Sporting Goods Financial Analysis plus 1 2 Page type written recommendation based upon the analysis. Watson Leisure Time Sporting Goods Chris Vencker has recently been approached by his cousin, Robert Watson, with a proposal to buy a 20% interest in Watson Leisure Time Sporting Goods. The company manufactures golf clubs, baseball bats, basketball goals, and other similar equipment. Mr. Watson is quick to point out the increase in sales over the last three years as indicated in the income statement (Exhibit l). The annual growth rate is 200/0_ A balance sheet for a similar timeframe is shown (Exhibit 2) and selected industry ratios are also presented (Exhibit 3). Note the industry growth rate in sales is only approximately I O percent per year. The stock in the corporation has become available due to the death of a stockholder. The stock is being offered her estate. The issue here is not to determine the exact price for the stock, but rather whether Watson Leisure Time Sporting Goods represents an attractive investment situation. Although Mr. Vericker has a primary interest in the profitability ratios, he will take a closer look at all the ratios. He has no fast and firm rules about required return on investment, but rather wishes to analyze the overall condition of the firm. The firm does not currently pay a cash dividend, and the return to the investor must come from the selling of the stock in the future. After doing a thorough analysis (including ratios for each year and comparisons to the industry), what comments and recommendations do you offer to Mr. Vericker? Please prepare your written comments in a clear and concise memorandum to Mr. Vericker. (Use a standard memorandum format.) Attach a separate sheet presenting the ratio calculations and analysis. Follow the industry numbers given in the form when rounding your answers. Growth in sales Profit margin Return on assets Return cm equity Receivable tumover Average collection Inventory turnover Fixed asset turnover Total asset turnover Current ratio Quick ratio Debt to total assets Times interest Fixed charge Growth in E.P.S. ndus Compan c us try co c ndustry c c c 2018 5.75% 8.22% 1326% 10.0x 36 5.11x 2.75K 1.43K 2.10x 1.05x 38.0% sox 3.85x 2019 9.98% 5.80% 824% 13.62% 9.5x 37.9 5.62x 2.66x 142x 2.08x 1.02x 39.5W0 5.20x 3.95x 2020 10.02% 5.81% 8.48% 14.16% 10.1x 356 5.84x 2.20x 2.15x 1.10x 40.10% 5.26K 3.97x 9.8% Exhibit 3 Selected Industry Ratios 2018 Growth in sales Profit margin _ 5.75% Return on assets (investment) 8.22% Return on equity _ _ 13.26% Receivable turnover... 1 ox Average collection period 36 days Inventory turnover 5.71X Fixed asset turnover 2.75x Total asset turnover 1.43X Current ratio _ 2.10X Quick ratio 1.05X Debt to total assets............ 38% Times interest earned . 5.oox Fixed charge coverage 3.85X Growth in EPS 2019 9.98% 5.80% 8.24% 13.62% 9.5X 37.9 days 5.62X 2.66X 1.42X 2. OSX 1.02x 39.5% 5.20X 3.95X 9.70/0 2020 10.02% 5.81% 8.48% 14.16% 10.1X 35.6 days 5_84X 2.20X 1_46X 2.15X 1.10X 40.1% 5_26X 3.97X _yq.um _N.pm SJ.Pum _amy _4K72P S_uqa.x 3 _u:.ucq __M2.'Y _u.nm _mv __LLY.U _.'Y.!AP