The financial statements of Divine Company are presented here.

DIVINE COMPANY

Income Statement

For the Year Ended December 31, 2014

Net sales.......... $700,000

Cost of goods sold....... 400,000

Selling and administrative expenses. 150,000

Interest expense....... 7,800

Income tax expense....... 43,000

Net income......... $ 99,200

DIVINE COMPANY

Balance Sheet

December 31, 2014

Assets

Current assets

Cash.......... $ 22,100

Debt investments....... 34,800

Accounts receivable (net) ... 90,700

Inventory.................. 155,000

Total current assets...... 302,600

Plant assets (net) ....... 461,300

Total assets ........$763,900

Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable....... $119,700

Income taxes payable.... 29,000

Total current liabilities..... 148,700

Bonds payable....... 110,000

Total liabilities ....... 258,700

Stockholders’ equity

Common stock........ 170,000

Retained earnings ........ 335,200

Total stockholders’ equity .... 505,200

Total liabilities and stockholders’ equity.... $763,900

Net cash provided by operating activities.. $61,300

Capital expenditures....... $42,000

Dividends paid........... $10,000

Average number of shares outstanding.. 65,000

Instructions

(a) Compute the following values and ratios for 2014. (We provide the results from 2013 for comparative purposes.)

(i) Current ratio. (2013: 2.4:1)

(ii) Working capital. (2013: $178,000)

(iii) Debt to assets ratio. (2013: 31%)

(iv) Free cash flow. (2013: $13,000)

(v) Earnings per share. (2013: $1.35)

(b) Using your calculations from part (a), discuss changes from 2013 in liquidity, solvency, and profitability.