Question 3:

Using the attached financial statements, comment on the companys (a) profitability (b) liquidity (c) solvency by calculating at least two ratios in each category.

Consolidated Statement of Income Radio Shack Corporation and Subsidiaries Year Ended December 31, 2005 2004 (In millions, except per share amounts) % of Revenues % of Revenues Dollars Dollars 100.0% $5,081.7 2,706.3 2.375.4 53.3 $4,841.2 2,406.7 2.434.5 100.0% 49.7 50.3 46.7 1,901.7 37.4 1,774.8 36.7 2.4 39.8 6.9 2.1 38.8 11.5 Net sales and operating revenues Cost of products sold Gross profit Operating expenses: Selling, general and administrative Depreciation and amortization Total operating expenses Operating income Interest income Interest expense Other income, net Income before income taxes Provision for income taxes Income before cumulative effect of change in accounting principle Cumulative effect of change in accounting principle, net of $1.8 million tax benefit_ Net income 123.8 2,025.5 349.9 5.9 (44.5) 10.2 321.5 51.6 101.4 1,876.2 558.3 11.4 (29.6) 2.0 542.1 0.1 (0.8) 0.2 6.4 1.0 0.2 (0.5) 11.2 4.2 204.9 269.9 5.4 337.2 7.0 (2.9) $ 267.0 (0.1) 5.3% $ 337.2 7.0% Consolidated Balance Sheets Radio Shack Corporation and Subsidiaries December 31. (In millions. except for share amounts) 2005 2004 Assets Current assets: Cash and cash equivalents $ 224.0 S 437.9 Accounts and notes receivable, net 309.4 241.0 Inventories, net 984.9 1,003.7 Other current assets 129.0 92.5 Total current assets 1.627.3 1.775.1 Property, plant and equipment net 4762 6520 Other assets, net 101.6 89.6 Total assets $ 2.205.1 $2.516.7 Llabuities and stockholders' Equity Current liabilities: Short-term debt, including current maturities of long-term debt $ 40.0 $ 55.6 Accounts payable 490.9 442.2 Accrued expenses and other current liabilities 379.5 342.1 Income taxes payable 75.0 117,5 Total current abilities 986.3 957.4 Long-term debt, excluding current maturities 494.9 506.9 Other non-current liabilities 135.1 130 3 Total liabilities 1.616.3 1.504.8 Commitments and contingent liabilities (see Notes 11 and 12) Stockholders' equity: Preferred stock, no par value. 1.000.000 shares authorized: Series A junior participating. 300,000 shares designated and none issued Series e convertible. 100.000 shares authorized and non issued Common stock $1 par value. 650.000.000 shares authorized 191.033.000 shares issued 191.0 191.0 Additional paid-in capital 88.2 Retained earnings 1.741.4 1.508.1 Treasury stock at cost 56.071.000 and 32,835,000 shares, respectively (1.431.6) (859.4) Unearned compensation (0.5) Accumulated other comprehensive income (loss) 0.3 10.3 Total stockholders' equity 588.8 9221 Total labuities and stockholders' equity $ 2.205.1 $2.510.7 The accompanying notes are an integral part of these consolidated financial statements 82.7