PROBLEM 1-8 Financial Statement Ratio Analysis The balance sheet and income statement for Chico Electronics are reproduced below (tax rate is 40%) CHICO ELECTRONICS Balance Sheet($thousands) As of December 31 Year 4 Year 5 $ 683 1.490 1,415 $ 325 3,599 2,423 13 6,360 1,541 $8,058 $ 875 116 Assets Current assets Cash Accounts receivable.. Inventories.......... Prepaid expenses ........ Total current assets ....... Property, plant and equipment, net. Other assets.. Total assets .... . Liabilities and Shareholders' Equity Current liabilities Notes payable to bank ....... Current portion of long-term debt Accounts payable ..... Estimated income tax liability Accrued expenses ----- Customer advance payments ... Total current liabilities Long-term debt ... Other liabilities Total liabilities Shareholders' equity Common stock $1.00 par value; 1,000,000 shares authorized 550,000 and 29.000 outstanding, respectively.... Preferred stock Series A 10%, 525 par value: 25,000 authorized 20,000 and 18.000 outstanding, respectively. Additional paid-i capital. Retained earnings Total shareholders' uity ------------ Total liabilities and shareholders' equity. 933 472 586 1.721 963 3,945 179 131 4.255 ....... 550 829 575 1.949 $8,058 CHICO ELECTRONICS Income Statement (thousands) For Years Ending December 31 Year 4 $7,570 261 7,831 4,850 Year 5 $12,065 345 12,410 8,048 Net sales... Other income, net Total revenues .. Cost of goods sold General, administrative, and marketing expense Interest expense... Total costs and expenses Net income before tax.. Income tax . . Net income ........ 1,531 2,025 6,403 ... 1,428 628 $ 800 10,151 2,259 994 $ 1,265 CHECK (d) EPS, $1.77 Required: Compute and interpret the following financial ratios of the company for Year 5: a. Acid-test ratio b. Return on assets c. Return on common equity d. Earnings per share e. Gross profit margin ratio 1. Times interest earned & Days to sell inventory h. Long-term debt to equity ratio 1. Total debt to equity 1. Sales to end-of-year working capital