The financial statements and notes of ZETA Corporation are as follows:

	ZETA CORPORATION
	Consolidated Balance Sheet
	As of Decenmber 31, 2011 and 2010
	($ thousands)		2011	2010
	Assets
	Current assets
	Cash.	$	2,000	2,000
	Receivables..		25,000	20,000
	Inventories (notes 1 and 2)..		56,000	38,000
	Prepaid expenses.		1,000	1,000
	Total current assets..		84,000	61,000
	Investment in associated companies.		14,000	11,000
	Property, plant, and equipment.		61,000	52,000
	Less: Accumulated depreciation		(23,000)	(19,000)
	Net property, plant, and equipment..		38,000	33,000
	Goodwill		2,000	0
	Total assets		138,000	105,000
	Liabilities and Stockholders' Equity
	Current liabilities
	Notes payable to banks.	$	16,000	14,000
	Accounts payable and accruals.		29,000	23,000
	Income tax payable..		7,000	2,000
	Current portion of long-term debt (note 6)..		2,000	1,000
	Total current liabilities..		54,000	40,000
	Long-term debt (note 6)..		25,000	15,200
	Deferred income taxes (note 5).		3,600	2,000
	Minority Interest		1,400	800
	Stockholders' equity (note 7)
	Common stock, $5 par value..		5,500	5,000
	Paid-in capital..		24,500	15,000
	Retained earnings.		24,000	27,000
	Total stockholders' equity		54,000	47,000
	Total liabilites and stockholders' equity.		138,000	105,000

ZETA CORPORATION

Consolidated Income Statement

For Years Ended December 31, 2011 and 2010

($ thousands)	2011	2010
Net sales...	$ 186,000	155,000
Equity in income (loss) of associated companies.	2,000	(1,000)
Expenses
Cost of sales	120,000	99,000

	Selling and administrative expenses	37,000	33,000
	Interest expenses.	10,000	6,000
	Total costs and expenses..	167,000	138,000
	Income before taxes and minority interest..	21,000	16,000
	Income tax expense (note 5)	10,000	7,800
	Income before minority interest	11,000	8,200
	Minority interest	200	0
	Income from continuing operations.	10,800	8,200
	Discontinued operations (note 4)
	Operations, net of tax..	(1,100)	(1,200)
	Loss on disposal, net of tax..	(700)	0
	Total gain (loss) from discontinued operations	(1,800)	(1,200)
	Income before cumulative effect of accounting change..	9,000	7,000
	Cumulative effect of change in accounting, net of tax (note 1)	1,000	0
	Net income	10,000	7,000

ZETA CORPORATION
Consolicated Statement of Cash Flows
For Years Ended December 31, 2011 and 2010
($ thousands)		2011	2010
Cash provided from (used for) operations
Net income.	.... $	10,000	7,000
Add (deduct) adjustments to cash basis:
Depreciation.	....	6,000	4,000
Deferred income taxes.	....	1,600	1,000
Minority interest..	....	200	0
Undistributed income of associated companies..	....	(1,400)	1,300
Loss on discontinued operations.	....	700	0
Increase in accounts receivable (5,000-2,000)..	....	(3,000)	(2,400)
Increase in inventories (18,000+100*-2,200)	....	(15,900)	(6,000)
Increase in prepaid expenses	....	0	(200)
Increase in accounts payable and accruals
(6,000-300*-3,200)	....	2,500	2,000
Increase in income taxes payable (5,000+700)*.	....	5,700	1,000
Net cash provided from (used for) operations.	....	6,400	7,700
Cash provided from (used for) investing activities
Additions to property, plant, and equipment.	....	(6,500)	(5,800)
Acquisition of TRO Company (excluding cash of $4,200)
Property, plant, and equipment..	(6,000)
Goodwill.	(2,000)
Long-term debt	4,800
Minority interest..	400
Current assets (receivables and inventories)	(4,200)
Current liabilities..	3,200	(3,800)	0
Investment in associated companies.	....	(1,600)	0

Proceeds from disposal of equipment	....	500	0
Net cash used for investing activities.	....	(11,400)	(5,800)
Cash provided from (used for) financing activities
Issuance of long-term debt.	....	7,500	5,000
Reduction in long-term debt..	....	(1,500)	(1,000)
Dividends paid	....	(3,000)	(2,000)
Increase (decrease) in notes payable to bank.	....	2,000	(3,500)
Net cash provided from (used for) financing activities..	....	5,000	(1,500)
Net increase (decrease) in cash..	....	0	400
Adjustments of noncash transactions arising from discontinued operations (see note 4)
Adjustments relating to acquisition of TRO Co (note 3)
Supplemental disclosures of cash flow information	2011	2010
Cash paid for interest	10,000	6,000
Cash paid for income taxes	2,600	4,800
Schedule of noncash activities:
Capital lease of $1,000 incurred on the lease of equipment

ZETA CORPORATION

Notes to Consolidated Financial Statements ($ thousands)

Note1: Change in accounting principle

During 2011 the company broadened its definition of overhead costs to be included in the determination of inventories to more properly match costs with revenues. The effect of the change in 2011 is to increase income from continuing operations by $400. The adjustment of $1,000 (after reduction for income taxes of $1,000) for the cumulative effect for prior years is shown in the net income for 2011.

Note 2: Inventories

Inventories are priced at cost (principally last-in, first-out [LIFO] method of determination) not in excess of replacement market. If the first-in, first-out (FIFO) method of inventory accounting had been used, inventories would have been $6,000 and $4,500 higher than reported at December 31, 2011 and December 31, 2010 respectively.

Note 3: Acquisition of TRO Company

Effective December 31, 2011, the company purchased most of the outstanding common stock of TRO Company for $8,000 in cash. The excess of the acquisition cost over fair value of the net assets acquired $2,000 will be recorded as goodwill and not amortized. The following unaudited supplemental pro forma information shows the condensed results of operations as though TRO Company had been acquired as of January 1, 2010.

	2011	2010
Revenues. $	205,000	172,000
Net income..	10,700	7,400

Details of acquisition (resources and obligations assumed):

Cash	$ 4,200
Accounts Receivable..	2,000
Inventories.	2,200
Property,Plant & Equipment..	6,000
Long-Term Debt	4,800
Accounts Payable & Accruals	3,200

Note 4: Discontinued operations

As of October 31, 2011, the board of directors adopted a plan authorizing the disposition of the assets and business of its wholly owned subsidiary, Zachary Corporation. The Loss on Disposal is $700 (net of income tax credits of $700) and is based upon the estimated realizable value of the assets to be sold plus a provision for costs of $300 for operating the business until its expected disposition in early 2012. Property, plant and equipment is reduced by $1,000 and inventories are reduced by $100 to net realizable value. The provision for costs of $300 is included in Accounts payable and accruals" and is reduced to $200 at year-end. Net sales of the operations to be discontinued are $18,000 in 2011 and $23,000 in 2010.

Note 5: Income taxes

The income tax expense consists of the following

		2011	2010
Current.	$	8,400	6,800
Deferred		1,600	1,000
Total..		10,000	7,800

The effective tax rates of 47.6% and 48 8% for 2011 and 2010, respectively, differ from the statutory federal income tax rate of 50% due to research and development tax credits of $500 in 2011 and $200 in 2010. Deferred taxes result from the use of accelerated depreciation methods for income tax reporting and the straight-line method for financial reporting.

Note 6: Long-term debt

2011 2010

10% promissory notes to institutional investors payable

in annual installments of $900 through $ 13,000 13,900

2015..
Unsecured notes to banks-interest 1% over prime	4,000	0
Capitalized lease obligations-payable to 2014 with an
average interest rate of 8%.........................................	1,000	0
11% subordinated note payable in annual installments of
$500 from 2012 through	5,000	0
2021
Other mortages and notes..	4,000	2,300
	27,000	16,200
Less current	2,000	1,000
maturities..
Total long-term debt..	25,000	15,200

The various loan agreements place certain restrictions on the corporation including the payment of cash dividends on common stock and require the maintenance of working capital as defined of not less than $18, 000. Approximately $10,000 of retained earnings is available for payment of cash dividends on common stock at December 31, 2011. The corporation entered into several long-term noncancelable leases of equipment during 2011which have been capitalized for financial reporting. There are no other significant lease arrangements.

Note 7: Stockholders' equity

The corporation has 5 million shares of authorized common stock, par value $5. There are 1 million shares outstanding at December 31, 2010 and this is increased by a 10% dividend payable in common stock during 2011. The changes in retained earnings are as follows:

		2011	2010
Beginning	$	27,000	22,000
balance.
Add net income		10,000	7,000
Less cash dividends..		(3,000)	(2,000)
Less 10% stock dividend..		(10,000)	0
Ending balance.		24,000	27,000

Required:

1.Conduct a comprehensive financial analysis for this company (using year-end data for ratio calculation). What are your findings and comments?

2.From the view of investors, how to find growing companies?

3.From your opinion, how to evaluate the profitability of the company?

4.How to judge the companys business strategy through cash flow statement and capital structure?(give me the cash flow!!)