Use the companys financial data to answer the questions.

XYZ Company: Balance Sheet as of December 31, 2017 (In Thousands)

Cash $77,500 Accounts payable $129,000

Receivables 336,000 Notes payable 84,000

Inventories 241,500 Other current liabilities 117,000

Total current assets 655,000 Total current liabilities 330,000

Net fixed assets 292,500 Long-term debt 256,500

Common equity 361,000

Total assets $947,500 Total liabilities and equity 947,500

XYZ Company: Profit and Loss Account for year ended December 31, 2017 (in Thousands)

Sales $1,607,500

Costs of goods sold 1,392,500

Selling, general, and administrative expenses 145,000

Earnings before interest and taxes (EBIT) $70,000

Interest expense 24,500

Earnings before taxes (EBT) $45,500

Taxes (40%) 18,200

Net Income $27,300

1. Calculate the indicated financial ratios for XYZ Company and complete the table:

Ratio	XYZ Company	Industry Average
Current ratio		2.0
Days sales outstanding (DSO)		35 days
Inventory turnover		6.7 times

2. If the companys inventory were assumed to be obsolete (illiquid), which financial ratio(s) would be a more appropriate measure of the companys liquidity position? Explain.
3. What does the companys DSO ratio show? Compare it with the industry average and interpret the result. Explain why the companys DSO ratio should be close to the industry norm.
4. List the advantage and disadvantages of the financial ratio analysis.

Advantages:

Disadvantages: