Requirements:
1. Perform a trend analysis on Tarrant's sales revenue, inventory, and receivables over the
past three years, using 2015 as the base. Is the trend in each of these areas favorable or
unfavorable for the company?
2. Using the industry averages as benchmark, analyze Tarrant's preformance over the past
three years in the following areas:
a. Liquidity
b. Turnover
c. Overall debt payment ability
d. Profitability
3. Evaluate Tarrant's quality of earnings. Are there any red flags in your analysis? Explain.

Analyze trends, calculate and interpret ratios; evaluate earnings quality Selected data from Tarrant, Inc., follows. 2015 $31,300 Selected income statement data Net sales revenue (all sales are credit sales) Cost of goods sold Operating expenses Interest Expense Income taxes 2018 $34.025 20,755 11,975 150 $388 2017 $33,050 16,195 13,490 255 $1,0101 2016 $32.200 14,812 13,650 3001 $1.121 2015 $4,900 2.900 Selected balance sheet data Cash Marketable securities Account receivable. net Inventory Total Current Assets Long-term assets Total Assets Accounts payable Short-term notes payable Total current liabilities Total long-term liabilities 2018 $2.750 425 6,800 6.100 16,075 7.050 23,125 3,750 5.950 9.700 551 2017 $3,200 550 6,400 4.300 14,450 7.800 22,250 2.450 4,750 7,200 2.933 2016 $4,100 550 5,200 3,300 13,150 9.150 22,300 1.700 3,625 5,325 6,958 1.800 Industry averages have been gathered for several ratios: Industry averages Current ratio Quick ratio Day's inventory outstanding Day's sales outstanding Day's payable outstanding Debt ratio Times-interest-earned ratio Gross margin percentage Opearting income percentage 2.40 1.00 80.00 60.00 32.00 61% 13.00 52% 12%