1. Liquidity ratios. Edison, Stagg, and Thorntonhave the following financial information at the close of business on July 10:  Edison    Stagg    Thornton    Cash    $6,000    $5,000    $4,000    Short-term 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: short-term    3,100    3,100    3,100    Accrued payables    300    300    300    Long-term 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:        20X5    20X4    Net  credit sales    $832,000     $760,000     Cost  of goods sold    530,000    400,000    Cash,  Dec. 31    125,000    110,000    Average  Accounts receivable    205,000    156,000    Average  Inventory    70,000    50,000    Accounts  payable, Dec. 31    115,000    108,000        Instructions  a.   Compute the accounts receivable and inventory turnover ratios  for 20X5. Alaska rounds all calculations to two decimal places.                              3. Profitabilityratios, trading on the equity. Digital Relay has bothpreferred and common stock outstanding. The com­pany reported the followinginformation for 20X7:  Net sales    $1,750,000     Interest expense    120,000    Income tax expense    80,000    Preferred dividends    25,000    Net income    130,000    Average assets    1,200,000    Average common stockholders’  equity    500,000  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.     20X2     20X1    Current Assets     $86,000     $80,000      Property, Plant, and Equipment  (net)     99,000    90,000    Intangibles     25,000    50,000    Current Liabilities     40,800    48,000    Long-Term Liabilities     153,000    160,000    Stockholders’ Equity     16,200    12,000    Net Sales     500,000    500,000    Cost of Goods Sold     322,500    350,000    Operating Expenses     93,500    85,000      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 severalyears. Selected data from the 20X1 and 20X2 financial statements follow.   20X2     20X1    Current Assets       $86,000       $80,000     Property, Plant, and Equipment (net)     99,000     80,000     Intangibles     25,000     50,000     Current Liabilities     40,800     48,000     Long-Term Liabilities       153,000       150,000     Stockholders’ Equity     16,200     12,000     Net Sales       500,000       500,000     Cost of Goods Sold       322,500       350,000     Operating Expenses       93,500     85,000   a.  Prepare a vertical analysis for 20X1 and20X2. Briefly comment on the results of your work.




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