The Pierce Company operates a high-volume retail outlet. The following are comparative financial statements for the company:

Additional data: The company has not issued any common stock for several years and the price of its common stock has remained relatively constant over that time. At the beginning of 2007, it had outstanding accounts receivable (net) of $7,600, an inventory of $11,000, accounts payable of $7,400, total liabilities of $44,600, and stockholders' equity of $85,400. The company typically makes 50% of its sales on credit. Pierce Company management has become concerned. Although it feels that progress has been made in "tightening up" the company's operating cycle, this has caused only a modest increase in profits and no increase in the company's stock market price. Management has asked for your assistance in identifying problem areas as well as strong points.

Required
1. Prepare a vertical analysis for the 2007 and 2008 financial statements of Pierce.
2. Compute the following ratios for 2007 and 2008:
a. Current
b. Acid-test
c. Inventory turnover
d. Receivables turnover
e. Payables turnover
f. Return on total assets
g. Return on stockholders' equity
h. Debt
i. Interest coverage
3. Briefly discuss any findings that your analysesreveal.

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Comparative Income Statements For Years Ended December 31 Sales (net) Cost of goods sold Gross profit Selling expenses Administrative expenses Interest expense Income before taxes Income tax expense Net income $180,000 $150,000 08,000 (85,500 S 64,500 $ 72,000 (21,600) (23,770) (15,000) (23,410) (.200 (2.800) $ 23,430 7.030 $16,400 S 23,290 6,990 16.300 Earnings per share (6,000 shares) Comparative Balance Sheets December 31 2008 Cash Investments (short-tem) Receivables (net) Inventory Noncurrent assets (net Total Assets 4,200 2,000 8,600 11,300 129,900 $156,000 $3,000 2,100 6,400 9,700 S140,000 Accounts payable Other current liabilities Bonds payable Common stock, $3 par Additional paid-in capital Retained earnings Accumulated other $ 12,000 1,000 40,000 18,000 30,000 54,100 S 10,000 2,400 35,000 18,000 30,000 43,600 comprehensive income Total Liabilities and 1,000 Stockholders' Equity $140,000