E10-7A. Ratio analysis. (LO 3)
Zap Electronics reported the following for the fiscal years ended January 31, 2007, and January 31, 2006.
| January3 1 | 2007 | 2006 |
| (in thousands) | ||
| Accounts receivable | $ 35,184 | $ 24,306 |
| Inventory | 106,754 | 113,875 |
| Current assets | 174,369 | 124,369 |
| Current liabilities | 71,616 | 68,001 |
| Long- term liabilities | 12,315 | 35,200 |
| Shareholder’s equity | 121,851 | 198,935 |
| Sales | 712,855 | 580,223 |
| Cost of goods sold | 483,463 | 400,126 |
| Interest expense | 335 | 709 |
| Net income | 11,953 | 4,706 |
Assume all sales are on credit and the firm has no preferred stock outstandings. Calculate the following ratios.
a. Current ratio (for both years)
b. Accounts receivable turnover ratio (for 2007)
c. Inventory turnover ratio (for 2007)
d. Debt-to-equity ratio (for both years)
e. Return on equity ratio (for 2007)
Do any of these ratios suggest problems for the company?
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