Sarah Smith was recently hired as a financial analyst by Electronic Industries, a manufacturer of electronic components. Her first task was to conduct a financial analysis of the firm covering the last two years. To begin, she gathered the following financial statements and other data.

Assume you are Sarah Smiths assistant and she has asked you to help her prepare a report that evaluates the companys financial condition. Answer the following questions:

• e.

What are the firms debt, times interest earned, and fixed charge coverage ratios? How does the company compare to the industry with respect to financial leverage? What conclusions can you draw from these ratios?

• f.

Calculate and discuss the firms profitability ratiosthat is, its net profit margin, return on assets (ROA), and return on equity (ROE).

• g.

Calculate companys market value ratiosthat is, its price/earnings ratio and its market/book ratio. What do these ratios tell you about investors opinions of the company?