The financial statement of Zach Industries for the year ended 31 December 2021 as follows:

Income Statement for the Year Ended 31 December 2021

Sales revenue		$600,000
Less: Cost of goods sold		460,000
Gross profits		$140,000
Less: Operating expenses
General and administrative expenses	$30,000
Depreciation expense	30,000
Total operating expense		60,000
Operating profits		$80,000
Less: Interest expense		10,000
Net profits before taxes		$70,000
Less: Taxes		27,100
Net profits after taxes (earnings available for common stockholders)		$42,900

Balance Sheet as at 31 December 2021

Assets
Cash	$ 15,000
Marketable securities	7,200
Accounts receivable	34,100
Inventories	82,000
Total current assets	$138,300
Net fixed assets	$270,000
Total assets	$408,300
Liabilities and Stockholders Equity
Accounts payable	$ 57,000
Notes payable	13,000
Accruals	5,000
Total current liabilities	$75,000
Long-term debt	$150,000
Stockholders equity
Common stock equity (20,000 shares outstanding)	$110,200
Retained earnings	73,100
Total stockholders equity	$138,300
Total liabilities and stockholders equity	$408,300

2. For each ratio calculated in (a), indicate whether Zach Industries is better or worse than the industry average.

Ratio	Industry Average
Gross profit margin	20.20%
Return on sales	9.10%
Inventory turnover	4.55
Number of days held in inventory	60 days
Account receivable turnover	15.30
Fixed asset turnover	2.50
Current ratio	2.35
Quick ratio	0.87
Debt ratio	0.33
Debt to equity	1.0

(5 marks)