Project red Industries after an expansion program. A large loss occurred in 2016, rather than the expected profit. As a result, its investors, board of directors, and managers concern about the firms survival. You are brought in as assistant to the Project red's chairman, who had the task of getting the company back into a sound financial position. Project's red 2015 and 2016 balance sheets and income statements, together with projections for 2017, are shown in the following tables. The tables also show the 2015 and 2016 financial ratios, along with industry average data. The 2017 projected financial statement data represent CFOs best guess for 2017 results, assuming that some new financing is arranged to get the company over the hump.

	2017E	2016	2015
Sales	$7,035,600	$5,834,400	$3,432,000
COGS except depr.	5,800,000	4,980,000	2,864,000
Other Expenses	612,960	720,000	340,000
Deprec.	120,000	116,960	18,900
Tot. op. costs	6,532,960	5,816,960	3,222,900
EBIT	502,640	17,440	209,100
Int. expense	80,000	176,000	62,500
EBT	422,640	-158,560	146,600
Taxes (40%)	169,056	-63,424	58,640
Net income	$253,584	($95,136)	87,960
Cash	$14,000	$7,282	$9,000
S-T invest.	71,632	20,000	48,600
AR	878,000	632,160	351,200
Inventories	1,716,480	1,287,360	715,200
Total CA	2,680,112	1,946,802	1,124,000
Gross FA	1,220,000	1,202,950	491,000
Less: Depreciation	383,160	263,160	146,200
Net FA	836,840	939,790	344,800
Total Assets	$3,516,952	$2,886,592	$1,468,800
Accts. payable	$359,800	$324,000	$145,600
Notes payable	300,000	720,000	200,000
Accruals	380,000	284,960	136,000
Total CL	1,039,800	1,328,960	481,600
Long-term debt	500,000	1,000,000	323,432
Common stock	1,680,936	460,000	460,000
Ret. earnings	296,216	97,632	203,768
Total equity	1,977,152	557,632	663,768
Total L&E	$3,516,952	$2,886,592	$1,468,800
Stock price	$12.17	$6.00	$8.5
# of shares	250,000	100,000	100,000
EPS	$1.01	($0.95)	$0.88
DPS	$0.22	$0.11	$0.22
Book Val. Per Share	$7.91	$5.58	6.64
Lease payments	$40,000	$40,000	$40,000
Tax rate	0.4	0.4	0.4

You must prepare an analysis of where the company is now, what it must do to regain its financial health, and what actions should be taken. Your assignment is to help her answer the following questions. Provide clear explanations, not yes or no answers.

a. Calculate the following financial ratios for 2017E. Assume 80% sales are credit sales. This step is very important to note for credit sales.

	Formula	2017E	2016	2015	Industry Average
Liquidity Ratios
Current ratio	CA/CL		1.5	2.3	2.7
Quick ratio	(CA - Inv.)/CL		0.5	0.8	1
Average collection period	Acc. Rec. / (credit sales/365)		49.4	46.7	36.5
Accounts receivable turnover	Credit sales/acct rec		7.38	7.82	11.5
Days payable outstanding	365/(sales/acct payable)		20.3	15.5	30
Asset Management Ratios
Inventory turnover ratio	COGS/Inv		4.5	4.8	6.1
Days inventory held	365/Inv turnover		81.1	76	40
Days sales outstanding	Acct Rec/(sales/365)		39.6	37.3	32
Fixed assets turnover	Sales/FA		6.2	10	7
Total assets turnover	Sales/TA		2	2.3	2.5
Debt Management Ratios
Debt Ratio	(Note payable + LT Debt)/TA		59.59%	35.64%	32%
Liabilities ratio	TL/TA		80.7	54.80%	50.0%
Time interest earned	EBIT/Int Exp		0.1	3.3	6.2
EBIDTA Coverage	(EBIT + Dep + Lease)/(Int exp + Lease + loan payment)		0.8	2.6	8
Profitability Ratios
Profit margin	NI / Sales		-1.60%	2.60%	3.60%
Operating margin	EBIT / Sales		0.30%	6.09%	7.10%
Gross profit margin	(sales-COGS) / Sales		14.60%	16.6%	15.50%
Basic earning power	EBIT / TA		0.60%	14.20%	17.80%
Return on assets	NI / TA		-3.30%	6%	9%
Return on equity	NI / Common equity		-17.10%	13.30%	18%
Operating ROA	EBIT / TA
Market value ratios
Price/earnings ratio	Share price / EPS		-6.30	9.7	14.2
Price/cash flow ratio	Share price / [(NI + Depr.) / shares outstanding]		27.50%	8	7.6
Market/ Book ratio	Market share price per share / book value per share		1.10%	1.3	2.9

After filling out the 2017 above, help her answer the following questions. Where is the company now and how it can get better. Provide clear explanations, not yes or no answers. Based on the data gathered from the 5 sections, Liquidity ratios, Asset mangement ratios, Debt mangement ratios, profitability ratios, and market value ratios, what you would suggest in each section to improve the company.

b) General Interpretation and suggestion you would provide based on the analysis for - LIQUIDITY RATIOS:

c) General Interpretation and suggestion you would provide based on the analysis for - ASSET MANAGEMENT RATIOS:

d) General Interpretation and suggestion you would provide based on the analysis for - DEBT MANAGEMENT RATIOS:

e) General Interpretation and suggestion you would provide based on the analysis for - PROFITABILITY RATIOS:

f) General Interpretation and suggestion you would provide based on the analysis for - MARKET VALUE RATIOS: