The following data are taken from the annual report of Khalin Drug Stores. In addition, relevant industry data are provided. a. Compute the ratios for Khalin corresponding to the industry ratios. b. What are its strengths (weaknesses) compared to the retail drug industry?

Khalin Drug Stores Balance Sheet as of January 31 (in thousands)

Cash $ 8,143 Accounts payable $54,449

Receivables 5,596 Notes payable 7,711

Inventory 148,554 Accrued expenses 28,823

Other current 11,608 Deferred income taxes 20,347

Net long-term assets 132,609 Long-term debt and leases 103,662

Total $306,510 Stockholders equity 91,518

Total $306,510

Khalin Drug Stores Income Statement for Year Ended January 31

(in thousands)

Sales $761,734

Cost of goods sold 550,930

Gross profit 210,804

Selling, general, and administrative expenses $156,070

Depreciation 10,784 166,854

EBIT 43,950

Interest 15,245

EBT 28,705

Taxes 12,056

Net Income $ 16,649

Retail Drug Industry Ratios

Current 2.00 Total asset turnover 3.20

Quick 0.50 Total liabilities to total assets 0.43

Days sales outstanding Times interest earned 3.00

(365-day year) 12 days net profit margin 3.33%

Inventory turnover 4.00 Return on total assets 10.60%

Long-term asset Return on equity 18.40%

turnover 8.00