P10-5A. Calculate and analyze financial ratios. (LO 3)
Given the information below from a firm’s financial statement
|
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.