given the information below from a firm s financial statement 541586

P10-5A. Calculate and analyze financial ratios. (LO 3)

Given the information below from a firm’s financial statement

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	2009	2008	2007
Net sales (all on account)	$5,003,837	$4,934,430
Cost of goods sold	2,755,323	2,804,459
Gross profit	2,248,514	2,129,971
Interest expense	61,168	71,971
Income taxes	186,258	167,239
Net income	$303,860	$272,864
Cash and cash equivalents	$ 18,623	$19,133	$ 3,530
Accounts receivable less allowance	606,046	604,516	546,314
Total current assets	1,597,3 77	1,547,290	1,532,253
Total assets	4,052,090	4,065,462	4,035,801
Total current liabilities	1,189,862	1,111,973	44,539
Long- term liabilities	1,153,595	1,237,549
Total shareholder’s equity*	1,698,532	1,715,940	1,592,180
*The firm has no preferred stock.

Required

a. Calculate the following ratios for 2009 and 2008:

1. Current ratio

2. Acid-test ratio (assume no short-term investments)

3. Working capital

4. Accounts receivable turnover ratio

5. Debt-to-equity ratio

6. Times-interest-earned ratio

7. Return on equity

8. Gross profit percentage

b. Suppose the changes from 2008 to 2009 in each of these ratios were consistent with the direction and size of the change for the past several years. For each ratio, explain what the trend in the ratio would indicate about the company.

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