[The following information applies to the questions displayed below.]

Williams Company is a manufacturer of auto parts having the following financial statements for 20212022.

Balance Sheet
December 31
	2022	2021
Cash	$ 260,000	$ 135,000
Accounts receivable	150,000	225,000
Inventory	385,000	175,000
Total current assets	$ 795,000	$ 535,000
Long-lived assets	1,640,000	1,500,000
Total assets	$ 2,435,000	$ 2,035,000
Current liabilities	200,000	175,000
Long-term debt	900,000	800,000
Shareholders equity	1,335,000	1,060,000
Total debt and equity	$ 2,435,000	$ 2,035,000

Income Statement
For the years ended December 31
	2022	2021
Sales	$ 3,500,000	$ 3,600,000
Cost of sales	2,500,000	2,600,000
Gross margin	1,000,000	1,000,000
Operating expenses*	500,000	450,000
Operating income	500,000	550,000
Taxes	175,000	192,500
Net income	$ 325,000	$ 357,500

Cash Flow from Operations
	2022	2021
Net income	$ 325,000	$ 357,500
Plus depreciation expense	60,000	50,000
+ Decrease (increase) in accounts receivable and inventory	(135,000)
+ Increase (decrease) in current liabilities	25,000
Cash flow from operations	$ 275,000	$ 407,500

*Operating expenses include depreciation expense.

Additional financial information, including industry averages for 2022, where appropriate, includes:

	2022	2021	Industry 2022
Capital expenditures	$ 125,000	$ 100,000
Income tax rate	35%	35%	35.0%
Depreciation expense	$ 60,000	$ 50,000
Dividends	$ 50,000	$ 50,000
Year-end stock price	$ 2.25	$ 2.75	25.00
Number of outstanding shares	1,800,000	1,800,000
Sales multiplier			1.50
Free cash flow multiplier			18.00
Earnings multiplier			9.00
Cost of capital	5.0%	5.0%
Accounts receivable turnover			11.10
Inventory turnover			10.50
Current ratio			2.30
Quick ratio			1.90
Cash flow from operations ratio			1.20
Free cash flow ratio			1.10
Gross margin percentage			30.0%
Return on assets (net book value)			20.0%
Return on equity			30.0%

Required:

Calculate and interpret the financial ratios (see Exhibit 20.9) for Williams for both years. Because the calculation of many ratios requires the average balance in an account (e.g., average receivables is required in calculating receivables turnover), you may assume for simplicity that the balances in these accounts in 2021 are the same as those in 2020. (Round "Earnings per share" to 3 decimal places, other "Profitability Ratios" to 1 decimal place (i.e. 0.123 = 12.3%) and rest of the answers to 2 decimal places.)