Twin Ricky Inc. (TRI) manufactures a variety of consumer products. The company's founders have run the company for 30 years and now are interested in retiring. They are seeking a purchaser who will continue the company's operations. A group of investors, Donna Inc., is looking into the acquisition of TRI.

To evaluate its financial stability and operating efficiency, Donna Inc. requested that TRI provide the latest financial statements and selected financial ratios. Summary information provided by TRI is presented below.

TRI

Statement of Income

For the Year Ended November 30, 2008

(in thousands)

Sales (net) ..............$30,500

Interest income .............500

Total revenue ..............31,000

Costs and expenses

Cost of goods sold ...........17,600

Selling and administrative expense ......3,550

Depreciation and amortization expense .....1,890

Interest expense ..............900

Total costs and expenses ........23,940

Income before taxes ...........7,060

Income taxes .............2,900

Net income .............$ 4,160

Instructions
(a) Calculate a new set of ratios for the fiscal year 2008 for TRI based on the financial statements presented.
(b) Explain the analytical use of each of the seven ratios presented, describing what the investors can learn about TRI's financial stability and operating efficiency.
(c) Identify two limitations of ratioanalysis.

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TRI Statement of Financial Position As of November 30 in thousands) Marketable securities (at cost) Property, plant, & equipment (net) $16,000 al current liabilities Common stock (S1 par value) Paid-in capital in excess of par equity Total liabilities and shareholders' equity $17,000 Selected Financial Ratios Current Industry TRI 2006 1.62 Average 1.63 2007 Times interest earned 13.2% Total debt to net worth