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1. Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10:

Edison

Stagg

Thornton

Cash

$6,000

$5,000

$4,000


Shortterm investments

3,000

2,500

2,000


Accounts receivable

2,000

2,500

3,000


Inventory

1,000

2,500

4,000


Prepaid expenses

800

800

800


Accounts payable

200

200

200


Notes payable: shortterm

3,100

3,100

3,100


Accrued payables

300

300

300


Longterm liabilities

3,800

3,800

3,800









 Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why?
2. Computation and evaluation of activity ratios. The following data relate to Alaska Products, Inc:
Instructions
a. Compute the accounts receivable and inventory turnover ratios for 20X5. Alaska rounds all calculations to two decimal places.
3. Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The company reported the following information for 20X7:
 Compute the profit margin on sales ratio, the return on equity and the return on assets, rounding calculations to two decimal places.
 Does the firm have positive or negative financial leverage? Briefly explain.
4. Horizontal analysis. Mary Lynn Corporation has been operating for several years. Selected data from the 20X1 and 20X2 financial statements follow.
a. Prepare a horizontal analysis for 20X1 and 20X2. Briefly comment on the results of your work.

5.Vertical analysis. Mary Lynn Corporation has been operating for several years. Selected data from the 20X1 and 20X2 financial statements follow.
a. Prepare a vertical analysis for 20X1 and 20X2. Briefly comment on the results of your work.
6. Ratio computation. The financial statements of the Lone Pine Company follow.

Instructions
Compute the following items for Lone Pine Company for 20X2, rounding all calculations to two decimal places when necessary:
a. Quick ratio
b. Current ratio
c. Inventoryturnover ratio
d. Accountsreceivableturnover ratio
e. Returnonassets ratio
f. Netprofitmargin ratio
g. Returnoncommonstockholders’ equity
h. Debttototal assets
i. Number of times that interest is earned

