12-32 (20-30 min.

)
1. Current ratio = $15,220 $12,358 = 1.23
2. Quick ratio = ($15,220 - $3,640) $12,358 = 0.94
3. Average collection period = 365 ($43,377 [($3,038 + $3,090) 2]
) = 25.8 days
4. Total-debt-to-total-assets = $27,520 $43,706 = 0.63
5. Total-debt-to-total-equity = $27,520 $16,186 = 1.70
6. Interest coverage = ($7,530 + $561) $561 = 14.4
7. Return on common stockholders equity = ($5,186 - $125)
[($16,186 - $1,580 + $13,706 - $1,634) 2] = 37.9%*
8. Gross profit rate = ($43,377 $22,141) $43,377 = 49.0%
9. Return on sales = $5,186 $43,377 = 12.0%
10. Asset turnover = $43,377 [($43,706 + $40,776) 2] = 1.03
11. Return on assets = ($7,530 + $561) [($43,706 + $40,776) 2] =
19.2%
12. Earnings per share ($5,186 - $125) 1,296 = $3.90**
13. Price-earnings ratio = $88.30 $3.90 = 22.64
14. Dividend-yield = $1.64 $88.30 = 1.9%
15. Dividend-payout = $1.64 $3.90 = 42.1%
16. Market to book value = $88.30 ($16,186 - $1,580) 1,297.2 =
7.84***
* Preferred dividends deducted from net income in the numerator.
Preferred stock deducted from total stockholders equity in the
denominator.
** Preferred dividends deducted from net income in numerator.
*** Preferred stock deducted from total stockholders equity in the
denominator.

12-35 (15 min.) Dollar amounts in millions.

1. $6,905 [($34,347 + $30,011) 2] = 21.4%
2. EBIT-to-sales ratio = $6,905 $64,816 = 10.65%
Total asset turnover = $64,816 [($34,347 + $30,011) 2] = 2.01
Return on total assets = 21.4% from part one or 10.65% x 2.01 =
21.4%.
12-47 (30-45 min.)

RYAN COMPANY
Income Statement
(In Thousands)

1. Increase
For the Year Ended (Decrease)
12/31/X3 12/31/X2 Amount %

Sales $ 800 $ 750 $50 6.7

Cost of goods sold 440 410 30 7.3
Operating expenses 300 295 5 1.7
Pretax income 60 45 15 33.3
Income taxes 20 15 5 33.3
Net income $ 40 $ 30 $10 33.3

RYAN COMPANY
Balance Sheet
(In Thousands)
Increase
(Decrease)
12/31/X3 12/31/X2 Amount %

Cash 30 25 5 20.0
Accounts Receivable 90 70 20 28.6
Merchandise inventory 80 70 10 14.3
Prepaid expenses 10 10 0 0
Land 30 30 0 0
Buildings 70 75 (5) (6.7)
Equipment 60 50 10 20.0
Total assets $370 $330 $40 12.1
Accounts payable 50 40 10 25.0
Taxes payable 20 15 5 33.3
Accrued expenses payable 15 10 5 50.0
Long-term debt 45 45 0 0
Paid-in capital 150 150 0 0
Retained earnings 90 70 20 28.6
Total liabilities &
stockholders' equity $370 $330 $40 12.1
12-47 (continued)

2. RYAN COMPANY
Common-Size Income Statements
For the Year Ended 12/31
20X3 20X2
Sales 100.0% 100.0%
Cost of goods sold 55.0 54.7
Operating expenses 37.5 39.3
Pretax income 7.5 6.0
Income tax 2.5 2.0
Net income 5.0% 4.0%

RYAN COMPANY
Common-Size Balance Sheets
December 31
20X3 20X2
Cash 8.1% 7.6%
Accounts receivable 24.3 21.2
Merchandise inventory 21.6 21.2
Prepaid expenses 2.7 3.0
Land 8.1 9.1
Building 18.9 22.7
Equipment 16.2 15.2
Total assets 100.0%* 100.0%

Accounts Payable 13.5% 12.1%

Taxes payable 5.4 4.5
Accrued expenses payable 4.1 3.0
Long-term debt 12.2 13.6
Paid-in capital 40.5 45.5
Retained earnings 24.3 21.2
Total liabilities & stockholders' equity 100.0% 100.0%*

*Adds to 99.9 due to rounding error.

12-47 (continued)

3. Ryan Company's net income increased by 33% and increased

from 4% to 5% of sales. Cost of goods sold grew faster than sales,
and therefore increased as a percentage of sales. Operating
expenses grew slower than sales and thus, decreased as a
percentage of sales.
All of the company's current assets, except prepaid expenses,
increased substantially. Equipment was up, but buildings
decreased, leaving long-term assets up only a little. Current
liabilities also increased, both in total and as a percentage of total
liabilities and stockholders' equity. Neither long-term debt nor
paid-in capital changed; but both decreased as a percentage of
total liabilities and stockholders' equity.
In summary, $35,000 of the $40,000 increase in total assets was in
current assets. The $40,000 growth in assets was financed half by
the year's operations (i.e., retaining $20,000 of net income instead
of paying dividends) and half from increases in current liabilities.