Problem 14-4 Financial information for Ernie Bishop Company is presented below. ERNIE BISHOP COMPANY Statements of Financial Position December 31 Assets 2016 Land 228,800 Building and equipment (net) 295,680 Prepaid expenses 51,040 Inventory 220,000 Receivables (net) 172,480 Short-term investments 91,520 Cash 123,200 1,182,720 Equity and Liabilities Share capital-ordinary, 10 par 352,000 Retained earnings 228,800 Bonds payable, due 2016 264,000 Notes payable 176,000 Accounts payable 84,480 Accrued liabilities 77,440 1,182,720 2015 228,800 308,000 40,480 237,600 140,800 70,400 114,400 1,140,480 352,000 204,160 264,000 176,000 73,920 70,400 1,140,480 ERNIE BISHOP COMPANY Income Statement For the Years Ended December 31 2016 Net sales 1,510,080 Cost of goods sold 1,075,360 Gross profit 434,720 Operating expenses 359,920 Net income 74,800 2015 1,404,480 1,012,000 392,480 318,560 73,920 Additional information: 1. Inventory at the beginning of 2015 was 207,680. 2. Total assets at the beginning of 2015 were 1,112,320. 3. No ordinary shares transactions occurred during 2015 or 2016. 4. All sales were on account. 5. Receivables (net) at the beginning of 2015 were 154,880. 6. Notes payable are classified as a current liability. Calculate the liquidity and profitability ratios of Ernie Bishop Company from 2015 to 2016. (Round Earnings per share to 2 decimal places, e.g. 1.65, and all others to 1 decimal place, e.g. 6.8 or 6.8%.) 2016 2015 LIQUIDITY Current Acid-test :1 :1 Accounts receivables turnover times times times times Inventory turnover PROFITABILITY Profit margin % % Asset turnover times times Return on assets Olo % Earnings per share Given below are three independent situations and a ratio that may be affected. For each situation, compute the affected ratio (1) as of December 31, 2016, and (2) as of December 31, 2017, after giving effect to the situation. Net income for 2017 was 88,000. Total assets on December 31, 2017, were 1,232,000. (Round ratios to 1 decimal place, e.g. 6.8 or 6.8%.) Situation (1) 31,680 ordinary shares were sold at par on July 1, 2017. There were no dividends in 2017. (2) All of the notes payable were paid in 2017. The only change in liabilities was that the notes payable were paid. (3) Market price of ordinary shares was 16 on December 31, 2016, and 22.00 on December 31, 2017. Ratio Return on ordinary shareholders' equity Debt to total assets Price-earnings ratio 2016 2017 Change Return on ordinary shareholders' equity % Debt to total assets % % Price-earnings ratio times times