Problem 14.12 (LO3) Interpretation of Financial Ratios Jordan Li is interested in purchasing the stock of Mendella, a company that sells concrete mixtures to the construction industry. Before purchasing the stock, Jordan would like to learn as much as possible about the company. However, all she has to go on is the current year's (year 3) annual report, which contains no comparative data other than the summary of the ratios given below

Year 3 Year 2 Year 1 Current ratio 2.6:1 2.4:1 2.2:1 Acid test (quick ratio) 0.9:1 1.0:1 1.1:1 Accounts receivable turnover 9.2 times 10.3 times 11.5 times Inventory turnover 6.2 times 7.8 times 8.1 times Return on total assets 14.5% 13.1% 11.3% Return on common stockholders' equity 17.2% 15.1% 12.9% Price-earnings ratio 14.5 17.2 17.8 Earnings per share $1.52 $1.51 $1.54