Calculate financial ratios for the three years

Question

The following are comparative data for Sunshine State Equipment, Inc., for the 3-year period 2006-2008.

Income Statement Data
	2008	2007	2006
Net sales	$1,400,000	$1,100,000	$1,220,000
Cost of goods sold	760,000	600,000	610,000
Gross profit on sales	$ 640,000	$ 500,000	$ 610,000
Selling, general, and other expenses	340,000	280,000	250,000
Income before taxes	$ 300,000	$ 220,000	$ 360,000
Income taxes	120,000	89,000	152,000
Net income	$ 180,000	$ 131,000	$ 208,000
Dividends paid	155,000	150,000	208,000
Net increase (decrease) in retained earnings	$ 25,000	$ (19,000)	$ 0

Balance Sheet Data
	2008	2007	2006
Assets
Cash	$ 50,000	$ 40,000	$ 75,000
Accounts receivable (net)	300,000	320,000	250,000
Inventory	380,000	420,000	350,000
Prepaid expenses	30,000	10,000	40,000
Land, buildings, and equipment (net)	760,000	600,000	690,000
Intangible assets	110,000	100,000	125,000
Other assets	70,000	10,000	20,000
	$1,700,000	$1,500,000	$1,550,000
Liabilities and Stockholders' Equity
Accounts payable	$ 120,000	$ 185,000	$ 220,000
Wages, interest, and dividends payable	25,000	25,000	25,000
Income tax payable	29,000	5,000	30,000
Miscellaneous current liabilities	10,000	4,000	10,000
8% bonds payable	300,000	300,000	250,000
Deferred revenues (long term)	10,000	10,000	25,000
No-par common stock, $10 stated value	500,000	400,000	400,000
Additional paid-in capital	510,000	400,000	400,000
Retained earnings	196,000	171,000	190,000
	$1,700,000	$1,500,000	$1,550,000

Instructions:

1. From the foregoing data, calculate financial ratios for the three years 2006-2008 as follows (for all ratios using balance sheet amounts, use the end-of-year balance):

(a) Return on equity

(b) Return on sales

(c) Asset turnover

(d) Assets-to-equity ratio

(e) Return on assets

(f) Current ratio

(g) Dividend payout ratio

2. Based on the ratios calculated in (1), evaluate Sunshine State Equipment, Inc., in 2008 as compared with 2007.