Use the 2016 and 2017 annual balance sheets and income statements data to calculate two years' ratios in the "Ratios" worksheet.

(1) Calculate liquidity ratios, efficiency ratios, leverage ratios, coverage ratios, profitability ratios, and Z-score;

(2) Design the Ratio Analysis Expert System:

We define "Good" if a 2017 financial ratio is better than the 2016 ratio AND the industry average in 2017;

"OK" if a 2017 financial ratio is better than the 2016 ratio OR the industry average in 2017;

"Unacceptable" for all other situations

(3) Compute the economic profit of the company.

(4) Analyze the ratio performance of the company and discuss your findings briefly.

Balance Sheet
Assets	2017	2016
Cash and Equivalents	152.00	137.60
Accounts Receivable	882.00	731.20
Inventory	906.00	815.20
Total Current Assets	1,940.00	1,684.00
Plant & Equipment	657.00	591.00
Accumulated Depreciation	166.20	146.20
Net Fixed Assets	490.80	444.80
Total Assets	2,430.80	2,128.80
Liabilities and Owner's Equity
Accounts Payable	185.20	155.60
Short-term Notes Payable	255.00	230.00
Other Current Liabilities	220.00	216.00
Total Current Liabilities	660.20	601.60
Long-term Debt	524.61	423.43
Total Liabilities	1,184.81	1,025.03
Common Stock	880.00	880.00
Retained Earnings	365.99	223.77
Total Shareholder's Equity	1,245.99	1,103.77
Total Liabilities and Owner's Equity	2,430.80	2,128.80

Income Statement
	2017	2016
Sales	5,150.00	4,532.00
Cost of Goods Sold	4,150.00	3,664.00
Gross Profit	1,000.00	868.00
Selling and G&A Expenses	350.30	270.00
Fixed Expenses	110.00	110.00
Depreciation Expense	20.00	18.90
EBIT	519.70	469.10
Interest Expense	79.00	65.50
Earnings Before Taxes	440.70	403.60
Taxes	79.33	72.65
Net Income	361.37	330.95
Notes:
Tax Rate	18%	18%

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Ratio	2017	2016	Industry 2017	Expert Analysis				2017	2016
Liquidity Ratios							Tax rate	18%	18%
Current Ratio			2.70 x				NOPAT
Quick Ratio			1.00 x				Total Operating Capital
Efficieny Ratios							After-tax Cost of Capital	10%	10%
Inentory Turnover			7.00 x				Dollar Cost of Capital
A/R Turnover			10.70 x				Economic Profit
Average Collection Period			33.64 days
Fixed Assets Turnover			11.20 x
Total Asset Turnover			2.60 x
Leverage Ratios
Total Debt Ratio			50.00%
Long-term Debt Ratio			20.00%
LTD to Total Capitalization			28.57%
Debt to Equity			1.41 x
LTD to Equity			40.00%
Coverage Ratios
Times Interest Earned			2.50 x
Cash Coverage Ratio			2.80 x
Profitability Ratios
Gross Profit Margin			17.50%
Operating Profit Margin			6.25%
Net Profit Margin			3.50%
Return on Total Assets			9.10%
Return on Equity			18.20%
Return on Common Equity			18.20%
Du Pont ROE			18.20%
Financial Distress Prediction
Market Value of Equity	1,352,800	1,178,890
Z-score			2.68