The accounting staff of SST Enterprises has completed the financial statements for the 2012 calendar year. The statement of income for the current year and the comparative statements of financial position for 2012 and 2011 follow.

SST Enterprises

Statement of Income

Year Ended December 31, 2012

(thousands omitted)

Revenue:

Net sales......................................................$600,000

Other.............................................................45,000

Total revenue................................................$645,000

Expenses:

Cost of goods sold..........................................$405,000

Research and development....................................18,000

Selling and administrative....................................120,000

Interest............................................................15,000

Total expenses.......................................$558,000

Income before income taxes..........................................$ 87,000

Income taxes..............................................................27,000

Net income..............................................................$ 60,000

Required

1. Calculate the following financial ratios for 2012 for SST Enterprises:

a. Times interest earned

b. Return on total assets

c. Return on common stockholders’ equity

d. Debt-to-equity ratio (at December 31, 2012)

e. Current ratio (at December 31, 2012)

f. Quick (acid-test) ratio (at December 31, 2012)

g. Accounts receivable turnover ratio (Assume that all sales are on credit.)

h. Number of days’ sales in receivables

i. Inventory turnover ratio (Assume that all purchases are on credit.)

j. Number of days’ sales in inventory

k. Number of days in cash operating cycle

2. Prepare a few brief comments on the overall financial health of SST Enterprises. For each comment, indicate any information that is not provided in the problem that you would need to fully evaluate the company’s financial health.

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SST Enterprises Comparative Statements of Financial Position December 31, 2012 and 2011 (thousands omitted) 2012 Assets Current assets: S 27,000 20,000 Cash and short-term investments Receivables, less allowance for doubtful accounts ($1,100 in 2012 and $1.400 in 2011) Inventories, at lower of FIFO cost or market 36,000 37,000 35,000 42,000 1,000 $100,000 $100,000 2,000 Total current assets 2012 2011 Property, plant, and equipment: Land Buildings and equipment, less accumulated depreciation ($74,000 $ 9,000 9,000 in 2012 and $62,000 in 2011) Total property, plant, and equipment 191,000 86,000 $200,000 $195,000 $300,000 $295,000 Total assets Liabilities and Stockholders' Equity Current liabilities Short-term loans Accounts payable Salaries, wages, and other Total current liabilities $ 20,000 15,000 80,000 68,000 7,000 $105,000 90,000 5,000 Long-term debt 15,000 40,00 Total liabilities 120,000 $130,000 Stockholders' equity: Common stock, at par Paid-in capital in excess of par $ 50,000 50,000 25,000 $ 75,000 75,000 90,000 $180,000 $165,000 $300,000 $295,000 25,000 Total paid-in capital Retained earnings 105,000 Total stockholders' equity Total liabilities and stockholders' equity