Using the financial statements for Happy Hamburger Company below:

Calculate the indicated ratios for Happy Hamburger.

Discuss Happy Hamburgers strengths and weaknesses as revealed by your analysis.

Suppose Happy Hamburger doubles its sales as well as its inventories, accounts receivable, and common equity during the year. How would that information affect the validity of your ratio analysis?

Happy Hamburger Company Income Statement for the year ending December 31, 20XX

Sales 1,607,500

Cost 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

Federal and state income taxes (40%) 18,200

Net Income 27,300

Happy Hamburger Company Balance Sheet as of December 31, 20XX

Assets Liabilities and Shareholder Equity Cash 80,500

Accounts payable 132,000 Accounts Receivable 334,500

Current portion of debt 84,000 Inventories 240,500 Other current liabilities 114,000

Total current assets 655,000

Total current liabilities 330,000

Net fixed assets 292,500

Long-term debt 256,500

Total assets 947,500

Total Liabilities 586,500

Common equity 361,000

Total Liabilities & Equity 947,500

Happy Industry Hamburger Average

Current ratio 2.2

Days sales outstanding (based on 365 day year) 36 days

Inventory turnover 6.7

Fixed asset turnover 12.1

Total asset turnover 3.00

Return on sales 1.20%

Return on assets 3.60%

Return on equity 9.00%

Debt ratio 55%