The balance sheet and income statement for the McDonald's are as follows.

McDonald's Corporation 2016 Income Statement ($ Millions)

Sales		$11,508
Cost of goods sold		6,537
Gross profits		$ 4,971
Marketing expenses and general
and administrative expenses	$ 1,832
Depreciation expense	345
Total operating expenses		$ 2,177
Operating profits		$ 2,794
Interest expenses		387
Earnings before taxes		$ 2,407
Income taxes		765
Net income before preferred stock dividends		$ 1,642
Preferred stock dividends		25
Net income available to common stockholders		$ 1,617

McDonald's Corporation December 31, 2016 Balance Sheet ($ Millions) Assets

Cash	$ 341
Accounts receivables	484
Inventories	71
Prepaid expenses	247
Total current assets	$ 1,143
Gross fixed assets	$20,088
Accumulated depreciation	5,127
Net fixed assets	$14,961
Investments	702
Other assets	1,436
Total assets	$18,242
Liabilities and Equity
Liabilities (debt):
Short-term notes payable	$ 1,629
Accounts payable	651
Taxes payable	53
Accrued expenses	652
Total current liabilities	$ 2,985
Long-term debt	6,325
Total liabilities	$ 9,310
Equity:
Preferred stock	$ 80
Common stock:
Par value and paid in capital	$ 708
Retained earnings	11,927
Treasury stock	(3,783)
Total common equity	$ 8,852
Total equity	$ 8,932
Total liabilities (debt) and equity	$18,242

1. Calculate the following ratios:

RATIO	INDUSTRY NORM
Current ratio	0.70
Inventory turnover	90
Average collection period	6.5 days
Debt ratio	50%
Total asset turnover	1.5
Fixed asset turnover	2
Operating profit margin	21%
Return on common equity	15%

2. Calculate the future sum of $5,000 given that it will be held in the bank 5 years at an annual interest rate of 6 percent.

3.

1. Knutson Products, Inc., is involved in the production of airplane parts and has the following inventory, carrying, and storage costs:
   • Orders must be placed in round lots of 250,000 units.
   • The carrying cost for 1 unit of inventory is $ 10
   • The ordering cost is $100 per order.
     1. Determine the optimal EOQ level.
     2. Determine the average inventory when the safety stock is 2000 units.