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Income Statement Year 2010 | | | Net sales | $795 | Cost of goods sold | 660 | Gross profit | 135 | Selling expenses | 73.5 | Depreciation | 12 | EBIT | 49.5 | Interest expense | 4.5 | EBT | 45 | Taxes (40%) | 18 | Net income | 27 |

1. Calculate the following ratios AND interpret the result against the industry average: Ratio | Your Answer | Industry Average | Your Interpretation

(Good-Fair-Low-Poor) | Profit margin on sales | | 3% | | Return on assets | | 9% | | Receivable turnover | | 16X | | Inventory turnover | | 10X | | Fixed asset turnover | | 2X | | Total asset turnover | | 3X | | Current ratio | | 2X | | Quick ratio | | 1.5X | | Times interest earned | | 7X | | 2. Analysis:

Give your interpretation of what the ratios calculations show and how the business can use this information to improve its performance. Justify all answers. Assignment 3...

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