Question: Extreme Edge, Inc. Income Statements For the Years... Extreme Edge, Inc. Income Statements For the Years Ended December 31, 2017, 2016 and 2015 ($ in thousands) 2017 2016 2015 Sales revenue $1,340 $1,200 $1,000 Less: Cost of goods sold 685 660 600 Gross profit 655 540 400 Operating expenses: Depreciation expense 200 120 100 Amortization expense 5 5 5 Other operating expenses 368 573 345 470 255 360 Income from operations 82 70 40 Interest (financing) expense 32 10 10 Pretax income 50 60 30 Income tax expense (40%) 20 24 12 Net income $ 30 $ 36 $ 18 Earnings per share $0.60 $0.72 $0.45 Extreme Edge, Inc. Balance Sheets December 31, 2017, 2016 and 2015 ($ in thousands) 2017 2016 2015 Assets Cash $ 65 $ 90 $ 30 Accounts receivable, net 150 80 90 Inventory 298 228 170 Total current assets 513 398 290 Property, Plant and Equipment: Equipment (at cost) 800 600 500 Less: accumulated depreciation (420) (220) (100) Equipment, net of accumulated depreciation 380 380 400 Intangible Assets: Customer database (at cost) 25 25 25 Less: accumulated amortization (15) (10) (5) Customer database, net of accumulated amortization 10 15 20 Total Assets $903 $793 $710 Liabilities Accounts payable $ 44 $145 $160 Accrued liabilities 6 20 32 Total current liabilities 50 165 192 Long-term Liabilities: Notes payable 300 100 100 Total Liabilities 350 265 292 Shareholders' Equity Common stock, $1 par 50 50 40 Additional paid-in-capital on common stock 430 430 360 Total contributed capital 480 480 400 Retained earnings 73 48 18 Total Shareholders' Equity 553 528 418 Total Liabilities and Shareholders' Equity $903 $793 $710 Problem 6-3 Required: Refer to the Chapter 6 Homework Spreadsheets above. Compute the 2017 profitability, liquidity and solvency ratios for Extreme Edge. 2017 2016 2015 Market Price per Share of Stock $ 7.20 $ 8.10 $ 7.65 Market Capitalization $ 360,000 $ 405,000 $ 306,000 Ratios 2017 2016 2015 Return on equity 6.8% 4.3% Return on assets 8.8% 5.6% Operating profit margin 5.8% 4.0% Asset turnover 1.51 1.41 Working capital $ 233 $ 98 Working capital (current) ratio 241.2% 151.0% Inventory turnover 2.89 3.53 Days in inventory 126.09 103.42 Accounts receivable turnover 15.00 11.11 Days in accounts receivable 24.33 32.85 Accounts payable turnover 4.55 3.75 Days in accounts payable 80.2 97.3 Net cash conversion cycle 70 39 Total debt to total capital 33.4% 41.1% Earnings coverage ratio 700.0% 400.0% Price-to-earnings ratio 11.3 17.0 View comments (1) Expert Answer