Ratio Analysis Questions INSTRUCTION: Read the questions carefully and use the information provided in each question to answer that question. Show all your calculation and workings. 1. The financial statements of Salim Inc. for the year ended December 31, 2019, follow. Assets Cash Marketable securities Accounts receivable Salim Inc. Income Statement for the Year Ended December 31, 2019 OMR 160,000 Sales revenue Less: Cost of goods sold Gross profits Less: Operating expenses Selling expense 106,000 OMR 54,000 General and administrative expenses Lease expense Depreciation expense Total operating expense Operating profits Less: Interest expense Income before taxes Less: Taxes Net Income after taxes OMR 16,000 10,000 1,000 10,000 OMR 37,000 OMR 17,000 6,100 OMR 10,900 4,360 OMR 6,540 OMR 500 1,000 25,000 Inventories Total current assets Land Buildings and equipment Less: Accumulated depreciation Net fixed assets Total assets 45,500 OMR 72,000 OMR26,000 90,000 38,000 OMR 78,000 OMR 150,000 Salim Inc. Balance Sheet December 31, 2019 Liabilities and Stockholders' Equity Accounts payable Notes payable Total current liabilities Long-term debt Common stock Retained earnings Total liabilities and stockholders' equity OMR 22,000 47,000 OMR 69,000 OMR 22,950 OMR 31,500 OMR 26,550 OMR 150,000 * The firm's 3,500 outstanding shares of common stock closed 2019 at a price of $ 20 per share. ** Total assets and total equity are averaged UNIVERSITY OF BURAIMI a. Use the financial statements to complete the following table. Assume that the industry averages given in the table are applicable for both 2018 and 2019. ( Show the full workings and calculations with formulas) Ratio (Rubric: 0.5 for the calculation workings, 0.5 mark for the correct answer and 0.5 mark for the correct evaluation. Total marks = 9 marks) Evaluation (better or worse) Industry average Actual 2018 Actual 2019 Current ratio 1.80 1.84 Debt ratio 65% 67% Times interest earned ratio 3.8 4.0 Gross profit margin 38% 40% Return on total assets 4.0% 4.0% Return on common equity 9.5% 8.0% Market/book ratio 1.1 1.2 Example: 1.04 Example: Worse 1. II. II. IV. V. VI. - * use 2018 performance results as a base for your evaluation b. Calculate earnings per share and the price-earnings ratio for Salim Inc. For 2019. (Rubric: 0.5 for the calculation workings and 0.5 mark for the correct answer. Total marks 0.5 x 4 = 2 marks) c. Analyze Salim Inc.' financial condition as it is related to (1) debt, (2) profitability, and (3) market using your financial ratios' findings in parts a and b. Hint: Use 2018 performance results and the industry average as a base for your comparison and analysis. (Rubric: 1 mark for each correct analysis and summary. Total marks 1x 3-3 marks)