Question

Based on the financial information provided, calculate thefollowing ratios and explain their purpose:

Current Ratio
Inventory Turnover Ratio
Accounts Receivable Turnover Ratio Debt to Equity Ratio
Return on Assets Ratio
Asset Turnover Ratio
Return on Equity Ratio
Profit Margin Ratio
Price-Earnings Ratio
Dividend Yield Ratio

Note: When a balance sheet amount is related toan income statement amount in computing a ratio, the balance sheetamount should be an average of that period. The average iscalculated by adding the ending balances of this year and last yearand dividing the result by 2. Describe how a bank lending officermight use ratio analysis. Select five ratios that would be mostuseful for the purpose and explain the rationale for yourselection.

	12/31/10	12/31/09
	Amount in Dollars	Amount in Dollars
Cash	200.00	150.00
Receivables	500.00	350.00
Inventories	750.00	755.00
Other Current Assets	100.00	75.00
Total Current Assets	1,550.00	1,330.00
Plant and Equipment	1,100.00	1,170.00
Other Long - Term Assets	150.00	100.00
Total Assets	2,800.00	2,600.00
Accounts Payable	510.00	400.00
Other Current Liabilities	25.00	25.00
Total Current Liabilities	535.00	425.00
Long Term Debt	375.00	400.00
Other Long Term Liabilities	225.00	175.00
Preferred Stock	250.00	250.00
Shareholders' Equity	1,415.00	1,350.00
Total Liabilities and Shareholders' Equity	2,800.00	2,600.00

	Year-2010	Year-2009
	Amount in Dollars
Net Sales	3500.00	3200.00
Cost of Goods Sold	2200.00	2100.00
Other Expenses	300.00	250.00
Depreciation	77.00	62.00
Interest Expenses	40.00	46.00
Tax	200.00	150.00
Net Income	683.00	592.00
Preferred Stock Dividend	25.00
Common Stock Dividends	260.00
Market Value of Equity	4000.00
Average Number of Shares	100.00
Share Price	40.00
Dividends per Share	2.60
Earnings per Share	6.58