Question One The financial data of Beta Company for the years 2010 and 2011 are as shown below: Statement of income Year ending December 31 2010 2011 Sales 12,000 19,000 Cost of sales 7,200 12,000 Depreciation expense 1,200 1,500 Sales, general and administration expense 700 1,000 Interest expense 1,300 1,200 Income before taxes 1,600 3,300 Income taxes expense 700 1,440 Net income 900 1,860 Statement of financial position As at December 31 2010 2011 Assets Cash 2,000 2,200 Accounts receivable 3,000 3,500 Inventory 4,000 4,200 Current assets 9,000 9,900 Noncurrent assets at cost 22,000 24,300 Accumulated depreciation (9,000) (10,500) Net non-current assets 13,000 13,800 Total assets 22,000 23,700 Liabilities and equity Accrued expenses 1,600 1,760 Accounts payable 2,400 2,640 Current liabilities 4,000 4,400 Notes payable 11,000 11,800 Long term debt 4,000 3,204 Common stock 2,000 2,300 Retained earnings 1,000 1,996 Total liabilities and equity 22,000 23,700 Required: a) Calculate the following ratios for 2011 1. Activity Ratios I. Inventory turnover II. Accounts receivable turnover III. Noncurrent asset turnover IV. Total asset turnover 2. Liquidity ratios I. Current ratio II. Quick ratio III. Cash ratio 3. Solvency ratios I. Debt to equity II. Debt to capital III. Times interest earned 4. Profitability ratios I. Gross margin II. Operating income to sales III. Return on sales IV. Return on assets V. Return on equity (15 marks) b) Disaggregate the 2011 Return on equity using the three component model (5 marks) c) Disaggregate the 2011 Return on equity using the five component model (5 marks) (Total: 25 marks)