The financial information below was taken from the records of Lotechnic Enterprises. The company pays no dividends. Current assets Noncurrent assets Total assets Current liabilities Long-term liabilities Capital stock Retained earnings Total liabilities and stockholders’ equity Net cash provided (used) by operating activities Net cash provided (used) by investing activities Net cash provided (used) by financing activities Net increase (decrease) in cash Interest expense Net income 1997 1996 $ 35,000 $ 31,000 93,000 86,000 $128,000 $117,000 $ 30,000 $ 25,000 40,000 40,000 20,000 20,000 38,000 32,000 $128,000 $117,000 $ (2,000) $ 3,000 (10,000) (20,000) 15,000 15,000 $ 3,000 $ (2,000) $ 5,000 $ 5,000 24,000 21,000 1995 1994 $24,000 $20,000 64,000 33,000 $88,000 $53,000 $13,000 $ 8,000 35,000 15,000 20,000 20,000 20,000 10,000 $88,000 $53,000 $ 6,000 $ 7,000 (31,000) (12,000) 25,000 8,000 0 $ 3,000 $ 4,000 $ 2,000 14,000 13,000 REQUIRED:

a. Compute the current ratio, the debt/equity ratio, and return on assets for each of the four years. Assume that the year-end balances in 1994 reflect the average balances during the year.

b. Prepare a common-size balance sheet for each of the four years.

c. Use the statement of cash flows, and analyze the earning power and solvency positions of Lotechnic.