Salza Technology Corporation

Annual Income Statements (in $ Thousands)

	2012	2013
Net sales	$375	$450
Less: Cost of goods sold	-225	-270
Gross profit	150	180
Less: Operating expenses	-46	-46
Less: Depreciation	-25	-30
Less: Interest	-4	-4
Income before taxes	75	100
Less: Income taxes	-20	-30
Net income	$ 55	$70
Cash dividends	$ 17	$ 20

Balance Sheets as of December 31 (in $ Thousands)

	2012	2013
Cash	$ 39	$ 16
Accounts receivable	50	80
Inventories	151	204
Total current assets	240	300
Gross fixed assets	200	290
Less accumulated depreciation	95	125
Net fixed assets	105	165
Total assets	$345	$465
Accounts payable	$ 30	$ 45
Bank loan	20	27
Accrued liabilities	10	23
Total current liabilities	60	95
Long-term debt	15	15
Common stock	85	120
Retained earnings	185	235
Total liabilities and equity	$345	$465

2. [Liquidity and Financial Leverage Ratios] Refer to the Salza Technology Corporation in Problem 1.

A. Using average balance sheet account data, calculate the (a) current ratio, (b) quick ratio, (c) total-debt-to-total-assets ratio, and (d) the interest coverage ratio for 2013.

B. Repeat the ratio calculations requested in Part A separately for 2012 and 2013 using year-end balance sheet account data. What changes, if any, have occurred in terms of liquidity and financial leverage?