Problem 13-23A (Algo) Ratio analysis LO 13-2, 13-3, 13-4, 13-5

The following financial statements apply to Franklin Company:

	Year 2				Year 1
Revenues	$	220,800			$	181,900
Expenses
Cost of goods sold		125,800				102,200
Selling expenses		20,800				18,800
General and administrative expenses		9,200				8,200
Interest expense		2,300				2,300
Income tax expense		20,700				16,000
Total expenses		178,800				147,500
Net income	$	42,000			$	34,400
Assets
Current assets
Cash	$	5,300			$	7,100
Marketable securities		1,900				1,900
Accounts receivable		35,700				31,800
Inventories		101,000				94,500
Prepaid expenses		3,800				2,800
Total current assets		147,700				138,100
Plant and equipment (net)		106,900				106,900
Intangibles		20,900				0
Total assets	$	275,500			$	245,000
Liabilities and Stockholders Equity
Liabilities
Current liabilities
Accounts payable	$	39,400			$	34,200
Other		16,500				16,600
Total current liabilities		55,900				50,800
Bonds payable		65,400				66,400
Total liabilities		121,300				117,200
Stockholders equity
Common stock (47,000 shares)		113,300				113,300
Retained earnings		40,900				14,500
Total stockholders equity		154,200				127,800
Total liabilities and stockholders equity	$	275,500			$	245,000

Required Calculate the following ratios for Year 1 and Year 2. Since opening balance numbers are not presented do not use averages when calculating the ratios for Year 1. Instead, use the number presented on the Year 1 balance sheet. a. Net margin. (Round your answers to 2 decimal places.) b. Return on investment. (Round your answers to 2 decimal places.) c. Return on equity. (Round your answers to 2 decimal places.) d. Earnings per share. (Round your answers to 2 decimal places.) e. Price-earnings ratio (market prices at the end of Year 1 and Year 2 were $6.10 and $4.78, respectively). (Round your intermediate calculations and final answers to 2 decimal places.) f. Book value per share of common stock. (Round your answers to 2 decimal places.) g. Times interest earned. Exclude extraordinary income in the calculation as they cannot be expected to recur and, therefore, will not be available to satisfy future interest payments. (Round your answers to 2 decimal places.) h. Working capital. i. Current ratio. (Round your answers to 2 decimal places.) j. Quick (acid-test) ratio. (Round your answers to 2 decimal places.) k. Accounts receivable turnover. (Round your answers to 2 decimal places.) l. Inventory turnover. (Round your answers to 2 decimal places.) m. Debt-to-equity ratio. (Round your answers to 2 decimal places.) n. Debt-to-assets ratio. (Round your answers to the nearest whole percent.)

		Year 2		Year 1
a.	Net margin	19.02	%	18.91	%
b.	Return on investment		%		%
c.	Return on equity	0.27	%	0.27	%
d.	Earnings per share
e.	Price-earnings ratio		times		times
f.	Book value per share of common stock
g.	Times interest earned	41.65	times	32.70	times
h.	Working capital	$91,800		$87,300
i.	Current ratio	2.64		2.72
j.	Quick (acid-test) ratio	0.84		0.86
k.	Accounts receivable turnover	6.18	times	5.72	times
l.	Inventory turnover	1.25	times	1.08	times
m.	Debt-to-equity ratio	0.79		0.92
n.	Debt-to-assets ratio	0	%	0	%