The Vanguard Group, Inc. has compiled the following financial statements and comparative financial

ratios for the year-end review.

Balance Sheet

Vanguard Group, Inc.

December 31, 2012

Assets

Current assets

Cash $ 118,750

Accounts receivable 296,250

Inventory 303,750

Total current assets $ 718,750

Gross fixed assets $625,000

Less: Accumulated depreciation (93,750)

Net fixed assets 531,250

Total assets $1,250,000

Liabilities and stockholders equity

Current liabilities

Accounts payable $ 111,250

Notes payable 211,250

Accruals 108,750

Total current liabilities $ 431,250

Long-term debt 235,000

Total liabilities $ 666,250

Stockholders equity

Common stock 318,750

Retained earnings 265,000

Total stockholders equity $ 583,750

Total liabilities and stockholders equity $1,250,000

Income Statement

Vanguard Group, Inc.

for the Year Ended December 31, 2012

Sales revenue $1,680,000

Cost of sales 1,362,480

Gross profits $ 317,520

Less: Operating expenses

Selling expense $ 125,600

General and administrative expense 81,600

Depreciation expense 24,000

Total operating expense $231,200

Operating profits $ 86,320

Less: Interest expense 15,600

Net profits before taxes $ 70,720

Less: Taxes (40%) 28,288

Net profits after taxes $ 42,432

Historical and Industry Average Ratios

Vanguard Group, Inc.

Industry

Average

Ratio 2010 2011 2012 Industry Avg.

Current ratio 1.6 1.7 --- 1.6

Quick ratio 0.9 1.0 0.9

Inventory turnover 6.0 5.0 8.4

Average collection period 40 days 50 days 40 days

Debt ratio 60% 56% 50%

Net profit margin 2.0% 2.3% 3%

Return on equity 7.5% 7.95% 10.5%

Required:

a. Calculate the firms 2012 financial ratios.

b. Provide a brief (one or two paragraphs) analysis of the firms performance from both time-series and cross-sectional viewpoints.