The PNC Corporation's 2019 and 2018 financial statements are as follows, along with some industry average ratios. 2018 PNC Corporation Statements of Financial Position 2019 Assets Cash P72,000 Accounts receivable 439,000 Inventories 894,000 Total current assets P1,405,000 Land and building 238,000 Machinery 132,000 Other non-current assets 61,000 Total assets P1,836,000 P65,000 328,000 813,000 P1,206,000 271,000 133,000 57.000 P1,667,000 Liabilities and Shareholders' Equity: Accounts and notes payable Accrued liabilities Total current liabilities Long-term debt Ordinary shares Retained earnings Total liabilities and shareholders' equity P432,000 170.000 P602,000 404,290 575,000 254.710 P1,836,000 P409,500 162.000 P571,500 258,898 575,000 261,602 P1,667,000 PNC Corporation Income Statement 2019 2018 Sales Cost of sales Gross profit General and distribution expenses Depreciation Miscellaneous EBIT Taxes (40%) Net income P4,240,000 3,680,000 P560,000 236,320 159,000 134.000 P30,680 9.204 P21,476 P3,635,000 2.980.000 P655,000 213,550 154,500 127.000 P159,950 47,985 P111,965 2018 PP4.17 P0.95 P23.57 5.65 x 23,000 Per Share Data 2019 PO.80 EPS P1.10 Cash dividend P12.34 Market price (average) P/E ratio 15.43 x 23,000 Number of shares outstanding 2019 Industry Financial Ratios 2.7 x Current ratio 7.0 x Inventory turnover** 32 days Day sales outstanding *** 13 x Non-current assets turnover** 2.6 X Total assets turnover** 9.1% Return on assets Return on equity 18.2% Debt-to-assets ratio 50% Profit margin 3.5% P/E ratio 6 x Price/cash flow ratio 3.5 x *Industry average ratios have been constant for the past 4 years **Based on year-end SFP figures ***Calculation is based on 365-day year. 2018 PP4.17 P0.95 P23.57 5.65 x 23,000 Per Share Data 2019 PO.80 EPS P1.10 Cash dividend P12.34 Market price (average) P/E ratio 15.43 x 23,000 Number of shares outstanding 2019 Industry Financial Ratios 2.7 x Current ratio 7.0 x Inventory turnover** 32 days Day sales outstanding *** 13 x Non-current assets turnover** 2.6 X Total assets turnover** 9.1% Return on assets Return on equity 18.2% Debt-to-assets ratio 50% Profit margin 3.5% P/E ratio 6 x Price/cash flow ratio 3.5 x *Industry average ratios have been constant for the past 4 years **Based on year-end SFP figures ***Calculation is based on 365-day year. POOD 5. Assess PNC Corporation's market value ratios and determine how its valuation compares with peers and how it has changed over time. 6. What do you think would happen to its ratios if the company initiated cost-cutting measures that allowed it to hold lower levels of inventory and substantially decreased the cost of sales? No calculations are necessary. Think about which ratios would be affected by changes in these two accounts