You are considering investing in Acme Incorporated. The company has provided the balance sheet and income statement for the previous year (attached). The current price of one share of stock is $46.25. Earning per share last year was $1.86. [You must use lined paper (print neatly!) and submit at the beginning of class on the due date OR type it in Word and submit via Canvas at the end of the day. It must be neat and legible and no writing in the margins!]

1. Calculate the requested financial ratios based on the Acme Inc. financial statements:

a. Current ratio =

b. Debt to equity ratio =

c. Return on sales (use net income AFTER taxes) =

d. Return on equity (use net income AFTER taxes) =

e. Earnings per share (use net income AFTER taxes) =

2. Based on the results of the Ratio Analysis (above), would you invest in Acme Incorporated? Why or why not? [You are expected to analyze and comment on each of the 5 ratios! See the textbook and the in-class exercise for appropriate examples for the analysis.]

Acme Incorporated Statement of Income FY 20XX REVENUES

Net Sales $4,210,000

Other income +103,965

Total revenue $4,313,965

COST OF GOODS SOLD $2,673,129

GROSS PROFIT (GROSS MARGIN) $1,640,836

OPERATING EXPENSES (Total Selling Expenses) $333,300 / Total General Expenses +$306,036 / Total Operating Expenses $639,336

NET INCOME BEFORE TAXES 1,001,500 // Income Tax Paid (25%) 250,375

NET INCOME AFTER TAXES $751,125

Acme Incorporated Balance Sheet December 31, 20XX

ASSETS

Current Assets Cash $280,928

Marketable Securities 514,800

Accounts Receivable 108,694

Notes Receivable 855,771

Inventories 218,156

Prepaid expenses and other 88,237

Current assets Total Current Assets $2,066,586

Fixed Assets Land $510,000

Plant and Buildings 904,096

Equipment 330,605

Total Fixed Assets $1,744,701

Other Assets

Goodwill, net $49,930

Total Other Assets $49,930

TOTAL ASSETS $3,861,217

LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities

Accounts Payable $226,977

Accrued expenses and other 380,496

Current liabilities

Current portion of finance debt 382,579

Total Current Liabilities $990,052

LongTerm Liabilities Notes Payable $228,772

Bonds 380,000

Other long-term liabilities 29,478

Total LongTerm Liabilities $638,250

Total Liabilities $1,628,303

Owners Equity Common Stock $389,538 (326,200 shares outstanding)

Retained Earnings 1,843,377

Total Owners Equity $2,232,915

TOTAL LIABILITIES & STOCKHOLDERS EQUITY $3,861,217