QUESTION (3) (24 marks) Financial statement analysis The Jensen Corporation has provided you with the following financial information. Balance Sheets, December 31 2025 2024 2023 Current assets Cash ......... $ 55,000 $ 50,000 $ 99,000 Account receivable, net .... 135,000 125,000 115,000 Inventories ...... 255,000 235,000 200,000 Prepaid expenses ............ 10,000 8,000 7,000 Total current assets ..... 455,000 418,000 421,000 Fixed assets, net .......... 201,000 196,000 180,000 Total assets.. .......... $656,000 $614,000 $601,000 Current liabilities ........... Accounts payable ........... Wages payable ............. Total current liabilities ...... $180,000 6,000 186,000 $200,000 1,500 201,500 $190,000 26,000 216,000 Long term liabilities ......... Total liabilities 235,000 421,000 255,000 456,500 300,000 516,000 10,000 10,000 10,000 Shareholders' equity Preferred shares, $2.50 per share annual dividend, 5,000 authorized, 1,000 issued and outstanding Common shares ........ Retained earnings ............ Total shareholders' equity ........ Total liabilities and shareholders' equity 100,000 125,000 235,000 $656,000 75,000 72,500 157,500 $614,000 50,000 25,000 85.000 $601,000 Total shareholders' equity ........ Total liabilities and shareholders' equity 235,000 $656,000 157.500 $614,000 85.000 $601,000 Income Statements Net sales Cost of goods sold Gross margin 2025 $623,700 297,350 326,350 2024 $594,000 294,500 299,500 Operating expenses 158,500 154,750 Income from operations Interest expense Income before income tax Income tax expense 167,850 25,000 142,850 35,710 144,750 28,000 116,750 29,200 Net income QUESTION (3), continued $107,140 $ 87,550 Additional information: a. The market price of a common share was $12.50 at December 31, 2025 and $12.00 at December 31, 2024. $107,140 $ 87,550 Net income QUESTION (3), continued Additional information: a. The market price of a common share was $12.50 at December 31, 2025 and $12.00 at December 31, 2024. b. Common shares outstanding were 20,000 at the end of 2025; 10,000 at the end of 2024; and 15,000 at the end of 2023. c. All sales are made on credit. d. The company's income tax rate is 25%. Required: Calculate the undernoted ratios for EACH year 2025 and 2024, and indicate if the ratio improved or deteriorated in 2025. Also, provide a brief explanation of what each ratio means or implies. Use the formulae shown in the textbook. Be sure to specify the name of the ratio. 1. Cash ratio 5. Profit margin ratio 2. Quick ratio 6. Earnings per share 3. Inventory turnover 7. Times interest earned 4. Return on Equity 8. Fixed asset turnover