Using Your Judgment 24-3

RNA Inc. manufactures a variety of consumer products. The companys founders have run the company for 30 years and are now interested in retiring. Consequently, they are seeking a purchaser who will continue its operations, and a group of investors, Morgan Inc., is looking into the acquisition of RNA. To evaluate its financial stability and operating efficiency, RNA was requested to provide the latest financial statements and selected financial ratios. Summary information provided by RNA is as follows.

RNA INC. INCOME STATEMENT FOR THE YEAR ENDED NOVEMBER 30, 2015 (IN THOUSANDS)
Sales (net)	$	30,590
Interest income	590
Total revenue		31,180
Costs and expenses
Cost of goods sold	17,690
Selling and administrative expenses	3,640
Depreciation and amortization expense	1,980
Interest expense	990
Total costs and expenses		24,300
Income before taxes	6,880
Income taxes	2,752
Net income	$	4,128

RNA INC. BALANCE SHEET AS OF NOVEMBER 30 (IN THOUSANDS)
2015	2014
Cash	$	490	$	590
Short-term investments (at cost)	390	290
Accounts receivable (net)	3,290	2,990
Inventory		6,090		5,490
Total current assets	10,260	9,360
Property, plant, & equipment (net)	7,190	7,090
Total assets	$	17,450	$	16,450
Accounts payable	$	3,790	$	3,490
Income taxes payable	990	890
Accrued expenses		1,790		1,490
Total current liabilities	6,570	5,870
Long-term debt	2,090	1,890
Total liabilities		8,660		7,760
Common stock ($1 par value)	2,790	2,790
Paid-in capital in excess of par	1,090	1,090
Retained earnings		4,910		4,810
Total stockholders equity	8,790	8,690
Total liabilities and stockholders equity	$	17,450	$	16,450

SELECTED FINANCIAL RATIOS
RNA INC.	Current Industry Average
2014	2013
Current ratio	1.59	1.60	1.72
Acid-test ratio	0.66	0.59	0.82
Times interest earned	8.64	8.59	8.54
Profit margin on sales	13.29%	12.19%	13.09%
Asset turnover	1.93	1.92	1.93
Inventory turnover	3.26	3.3	3.27

(a)

Calculate a new set of ratios for the fiscal year 2015 for RNA based on the financial statements presented. (Round answers to 2 decimal places, e.g. 52.75.)

Current ratio		: 1
Acid-test ratio		: 1
Times interest earned
Profit margin on sales		%
Asset turnover		times
Inventory turnover		times