Using the Exhibit A document, compute the following ratio, compare it to the industry average, and comment.

Compute the current ratio.

Compute the quick ratio.

Compute days in inventory.

Compute days outstanding in accounts receivable.

Compute the gross margin.

Compute the net income percentage.

Compute the long term debt to equity ratio.

Compute the interest coverage.

Compute the ROA

Compute the ROE.

Compute the ROE using the DuPont Model.

Exhibit A

James Trading Corporation

Balance Sheet

December 31, 20XX

Assets

$

Liabilities and Equity

$

Cash

23,015

Accounts receivable

141,258

Accounts payable

184,372

Inventory

212,444

Long term debt

168,022

Total current assets

376,717

Total liabilities

352,394

Net Plant and equipment

711,256

Common Stock

313,299

Other assets

89,879

Retained earnings

512,159

Total equity

825,458

Total Assets

$1,177,852

Total Liabilities and Equity

$1,177,852

James Trading Corporation

Income Statement

December 31, 20XX

Income Statement

$

Sales

$2,130,000

Cost of goods sold

(1,015,000)

Gross margin

1,115,000

Operating expenses

(878,000)

Depreciation

(16,030)

Operating income

220,970

Interest expense

(10,011)

Earnings before taxes

210,959

Income taxes

(54,000)

Net income

$156,959

Industry Average Ratios

Item

Ration

Current ratio

2.1

Quick ratio

0.8

Days in inventory

92

Days in accounts receivable

63

Gross margin

23.9%

Net margin

12.3%

Long term debt to equity ratio

1.0

Interest coverage

5.6

ROA

5.3%

ROE

18.8%