The 1996 and 1997 financial statements of Ken’s Sportswear follow. Balance Sheet 1997 1996 Assets Cash $ 9,000 $ 7,000 Accounts receivable 12,000 9,000 Inventory 18,000 15,000 Long-lived assets (net) 60,000 50,000 Total assets $99,000 $81,000 Liabilities and Stockholders’ Equity Accounts payable $ 16,500 $ 12,000 Long-term liabilities 46,000 40,000 Common stock 20,000 20,000 Additional paid-in capital 5,000 5,000 Retained earnings 11,500 4,000 Total liabilities and stockholders’ equity $ 99,000 $ 81,000 Income Statement 1997 1996 Sales (all on credit) $72,000 Less: Cost of goods sold 30,000 Gross profit $42,000 Operating expenses 12,000 Net income from operations $30,000 Interest expense 5,000 Net income from continuing operations before tax $ 25,000 Income taxes 8,500 Net income $ 16,500 Dividends $ 9,000 Per-share market price $ 36 $ 30 Outstanding common shares 2,000 2,000 REQUIRED:

a. Compute all ratios described in Figure 3-16 for 1997.

b. Prepare common-size financial statements.

c. Evaluate the company’s financial performance and condition.