The following information has been provided in Appendix C:

Actual ratios for Sterling Company for 2017 and 2018

Industry averages for 2019 ratios

2019 Income Statement for Sterling Company

2019 Balance Sheet for Sterling Company

Required:

(Note: round all final answers to 2 decimal places)

1) Identify and calculate ONE ratio for 2019 that is classified as a Debt Utilization Ratio.

2) Interpret the ratio that you have calculated in requirement 1) above.

3) For the ratio you have calculated in requirement 1) above, provide an evaluation of

Sterling Companys performance compared to the Industry Average.

4) Identify and calculate the ratio for 2019 that measures the number of times the company

completed its purchase hold sale cycle.

5) For the ratio calculated in requirement 4) above, identify the major ratio category in

which it would be classified.

6) Calculate Accounts Payable Period for 2019.

7) For the ratio calculated in requirement 6) above, evaluate the trend for Sterling

Company.

8) Identify and calculate the ratio for 2019 that measures the return being generated on

funds invested by owners.

A2 * 27% [4Th 4 10:49 File Edit View Window Help Test 1 v2 - FIN 1203 - F2020.pdf Test 1 V2 - FIN 12.. Test #1 - Appendi... a # 7 13396 Historical and Industry Average Ratios Sterling Company Ratio Accounts Payable Period Average Collection Period Current Ratio Debt to Total Assets Fixed Charge Coverage Gross Profit Margin Inventory Holding Period Inventory Turnover Accounts Payable Turnover Profit Margin Quick Ratio Receivables Turnover Return on Assets Return on Equity Times Interest Earned Ratio Total Asset Turnover Actual 2017 60.80 days 45.00 days 1.40:1 20.00% 6.70 times 28.00% 38.30 days 9.53 times 6.00 times 7.20% 0.75 : 1 8.11 times 5.33% 6.66% 8.20 times 0.74 times Actual 2018 58.50 days 36.40 days 1.55:1 20.00% 6.10 times 27.00% 39.60 days 9.22 times 6.24 times 6.70% 0.84 : 1 10.03 times 5.36% 6.70% 7.30 times 0.8 times Industry 2019 45.80 days 35.00 days 1.65: 1 30.00% 6.50 times 27.50% 42.40 days 8.61 times 7.97 times 8.90% 0.89:1 10.43 times 6.59% 9.10% 8.00 times 0.74 times MacBook Pro F2 O F3 DOO DOO F4 F5 FO F7 F9 F10 $ O 70 A & * # 3. 14227% Th 4 10:50 Mac ader File Edit View Window Help Tost 1 v2 FIN 1203 - F2020.pdf Test 1 V2 - FIN 12... * Test #1 - Appendi... Q 7 /7 N 132% APPENDIX C (cont'd) Balance Sheet Sterling Company As at December 31, 2019 Assets: Current assets Cash Marketable securities Accounts receivable Inventory Total current assets Capital assets Accumulated amortization Net capital assets Other assets Total assets $200 50 800 950 $2,000 $12,000 3,000 $9,000 $1,000 $12,000 MacBook Pro 03 000 000 F4 F5 F6 F7 FB F9 F10 F11 A * $ 4 2 % 5 & 7 3 6 8 9 0 W E R T Y U 0 A2 * 27% 43 Th 4 10:50 File Edit View Window Help Test 1 V2 - FIN 1203 - F2020.pdf Test 1 V2 - FIN 12... x Test #1 - Appendi... Q 0 7 13396 Income Statement Sterling Company for the year ended December 31, 2019 Sales (on credit) Cost of goods sold Gross profit Selling and administrative expenses * Operating earnings (EBIT) Interest expense Earnings before taxes Tax expense (40%) Net income (EAT) $10,000 7,500 $2,500 1,200 $1,300 200 $1,100 440 $660 * Includes lease payments of $50 MacBook Pro F2 20 F3 000 000 F4 F6 F7 FIO # 3 $ 4 * 5 & 7 6 8 9 0 14* 27% () Th 4 10:50 ader File Edit View Window Help Test 1 v2 - FIN 1203 - F2020.pdf Test 1 v2 - FIN 12.. X Test #1 - Appendi... 1329% 7 7 Liabilities and shareholders' equity: Current liabilities Accounts payable Line of credit Accrued expenses Total current liabilities Long-term debt Total liabilities Shareholders' equity Common shares (200 shares) Retained Earnings Total shareholders' equity Total liabilities and shareholders' equity $900 200 100 $1,200 3,000 $4,200 $6,800 1,000 $7,800 $12,000 MacBook Pro 80 F2 000 54