Question-2

Company As year-end balance sheets and income statements are as follows:

1. Compare the year-end short term liquidity position of this company at the end of 2006, 2005 and 2004 by computing the: a) current ratio and b) acid-test ratio. Comment on the results.
2. For the years ended December 31,2006 and 2005, assume all sales are on credit and then compute the following: a) collection period, b) accounts receivable turnover, c) inventory turnover and d) days sales in inventory. Comment in the ratios from 2005 to 2006.
3. Compare the long-term risk and capital structure positions of the company at the end of 2006 and 2005 by computing the: a) total debt ratio and b) times interest earned. Comment on these ratio results.
4. Evaluate the efficiency and profitability of the company by computing the: a) net profit margin, b) total asset turnover and c) return on total assets. Comment on the results.
5. Regarding the additional information given below;

Compute the following for 2006 and 2005: a) return on common stockholders equity, b) price-earnings ratio on December 31 and c) dividend yield. Evaluate the profitability of the company based on your results.

Commonstockmarketprice,December31,2006Commonstockmarketprice,December31,2005Annualcashdividendspersharein2006Annualcashdividendspersharein2005$15.0014.000.600.30 Commonstockmarketprice,December31,2006Commonstockmarketprice,December31,2005Annualcashdividendspersharein2006Annualcashdividendspersharein2005$15.0014.000.600.30