Keystone Resources has a net profit margin of 8 percent and earnings after taxes of $2 million. Its current balance sheet is as follows:
a. Calculate Keystone's return on stockholders' equity.
b. Industry average ratios are
Net profit margin ........ 10%
Total asset turnover ...... 2.0 times
Equity multiplier ........ 1.5 times
What does a comparison of Keystone to these averages indicate about the firm's strengths and weaknesses?
c. Keystone has inventories of $3.2 million. Compute the firm's quickratio.