Chapter 15, Problem 15.34BP

Requirement 1(a):

Evaluation of company’s stock as investment: In general, financial ratios are used to evaluate capabilities, profitability, and overall performance of a company. The following are the ratios that evaluate the company’s stock as investment.

Financial Ratios: Financial ratios are the metrics used to evaluate the capabilities, profitability, and overall performance of a company.

To determine

To Compute: The ratio for 2018 and 2017.

Requirement 1(b):

To determine

To Compute: The cash ratio for 2018 and 2017.

Requirement 1(c):

To determine

To Compute: The times-interest earned ratio for 2018 and 2017.

Requirement 1(d):

To determine

To Compute: The inventory turnover ratio for 2018 and 2017.

Requirement 1(e):

To determine

To Compute: The gross profit percentage for 2018 and 2017.

Requirement 1(f):

To determine

To Compute: The debt to equity ratio for 2018 and 2017

Requirement 1(g):

To determine

To Compute: The rate of return on common stockholders’ equity for the years 2018 and 2017.

Requirement 1(h):

To determine

To Compute: The EPS for 2018 and 2017.

Requirement 1(i):

To determine

To Compute: The price/ earnings ratio for the years 2018 and 2017.

Requirement 2 a:

To determine

To Decide: Whether T has the ability to pay the debt.

Requirement 2 b:

To determine

To Explain: Whether the common stock increased or decreased due to attractiveness.