Question l Being a prudent investor, Pat Perkins investigates a company thoroughly before purchasing shares of its stock for investment. At present, Pat is interested in the common stocks of Plunge Enterprises, a provider of oilfield services and equipment, focused on drilling and production-related needs of oil and gas companies. All Pat has available on the company is a copy of its annual report for the current year (Year 3), which contains the Year 3 financial statements and the summary of the ratios as follows Year 3 Year 2 Year 1 Current Ratio Acid-test (quick) ratio Accounts receivable turnover Inventory turnover Sales trend Dividends paid per share* Dividend yield ratio 2.8 to 1 0.7 to 1 8.6 times 5.0 times 130.0 $2.50 5% 2.5 to 1 0.9 to 1 9.5 times 5.7 times 118.0 $2.50 4% 2.0 to 1 1.2 to 1 10.4 times 6.8 times 100.0 $2.50 3% Dividend payout ratio 40% 50% 60% 10.4% 9.0% Return on total assets 13.0% 16.2% 11.8% 14.5% Return on common equity There are no changes in common stock outstanding over the three-year period Pat would like to answers to a number of questions about the trend of events over the last three years in Plunge Enterprise. The questions are as follows: a. Is the market price of the company's stocks going up or down? b. Is the amount of earnings per share increasing or decreasing? c. Is the price earnings ratio going up or down? d. Is the company employing financial leverage to the advantage of the common stocks Is it becoming easier for the company to pay its bills as they come due? e. f. Are customers paying their bills at least as fast as they did in Year 1? g. Is the total of the accounts receivable increasing, decreasing, or remaining constant? Is the level of inventory increasing, decreasing, or remaining constant? h. Required Answer each of Pat's questions using the data given above. In each case, explain how you arrived at your