The Derkins Corporation had the following information available:

	Year 3		Year 2		Year 1
Income Statement
Revenue	30,848		27,433		25,512
Cost of goods sold	23,122		20,938		19,875
Selling & admin. expenses	6,082		5,053		4,672
Interest expense	504		458		350
Net Income	1,140		984		615
Balance Sheet
Assets
Cash	681		354		589
Accounts receivable	506		587		412
Inventory	3,200		2,627		2,245
Property and equip. (net)	3,281		2,810		2,514
Total Assets	7,668		6,378		5,760
Liabilities
Accounts payable	373		358		280
Unredeemed gift cards	469		410		385
Long-term liabilities	3,234		2,824		2,643
Stockholders' Equity
Common stock	985		985		985
Retained earnings	2,607		1,801		1,467
Total Liabilities and Equity	7,668		6,378		5,760

Required:

1. Prepare a horizontal analysis on revenue, cost of goods sold and net income and assess the results.

2. Prepare a vertical analysis on inventory, property and equipment as well as long-term liabilities and assess the results.

3. Calculate the current ratio, days sales in inventory ratio as well as the liabilities to stockholders equity ratio and assess the results to determine if the companys liquidity and solvency are generally getting better or worse.

4. Calculate the net income percentage as well as the return on investment ratio and assess the results to determine if the companys profitability is generally getting better or worse.

5. If the company purchased $750 of inventory on account, how would that transaction impact each ratio calculated in requirement 3 and 4?

Questions:

1. For the Derkins Corporation, in a horizontal analysis, what is the relative change in revenue for year 2? Round your answer to three decimal places and enter as a number not as a percentage (e.g. 0.209 not 20.9%).

2. For the Derkins Corporation, in a vertical analysis, what is the amount of property and equipment for year 3 relative to total assets? Round your answer to three decimal places and enter as a number not as a percentage (e.g. 0.209 not 20.9%).

3. For the Derkins Corporation, what is the company's current ratio for year 1? Round your answer to two decimal places.

4. For the Derkins Corporation, what is the company's liabilities to stockholders' equity ratio for year 2? Round your answer to two decimal places.

5. For the Derkins Corporation, the company's liquidity is generally getting ________ (better/worse) over the three year period.

6. For the Derkins Corporation, the company's solvency is generally getting ________ (better/worse) over the three year period.

7. For the Derkins Corporation, what is the company's return on investment ratio for year 3? Round your answer to three decimal places and enter as a number not as a percentage (e.g. 0.209 not 20.9%).

8. For the Derkins Corporation, the company's profitability is generally getting ________ (better/worse) over the three year period.

9. If the Derkins Corporation purchased $750 of inventory on account, its current ratio would________ (improve. / get worse. / not change.)

10. If the Derkins Corporation purchased $750 of inventory on account, its net income percentage would________ (improve. / get worse. / not change.)