The ratios set forth below are identified as significant in the current and prior years' audits of XYZInc. Using the XYZ Company Balance Sheet and Income Statement Calculate the 20X2 ratios then compare the values of each ratio. Ratios using balance sheet numbers are based on end-of year balances.

XYZ Company

Balance Sheet

December 31, 20X2

Cash $ 240,000

Accounts receivable 400,000

Inventory 600,000

Total current assets 1 ,240,000

Plant and equipment, net 760,000

Total assets $ 2,000,000

Accounts payable $ 160,000

Notes payable100,000

Other current liabilities 140,000

Total current liabilities 400,000

Long-term debt350,000

Common stock 750,000

Retained earnings500,000

Total liability and capital $ 2,000,000

XYZ Company

Income Statement

For the Year Ended December 31, 2017

Sales $ 3,000,000

Cost of goods sold

Materials800,000

Labor 700,000

Overhead 300,000 1,800,000

Gross margin 1,200,000

Selling expenses 240,000

General and administrative expenses300,000

Operating income660,000

Less: Interest expense (40,000)

Income before taxes 620,000

Less: Federal income taxes ( 220,000)

Net Income $ 400,000

Ratios 12/31/x2 12/31/X1

Current ratio ?2.5

Quick ratio ? 1 .3

Accounts receivable? 5.5

Inventory turnover ? 2.5

Total asset turnover ? 1.2

Gross margin % ? 35%

Net operating margin % ? 25%

Times interest earned? 10.3

Total debt to equity % ? 50%