Reference no: EM132379713

Question

Two-Rivers Inc. (TRI) manufactures a variety of consumer products. The company's founders have run the company for thirty years and are now interested in retiring. Consequently, they are seeking a purchaser, and a group of investors is looking into the acquisition of TRI. To evaluate its financial stability, TRI was requested to provide its latest financial statements and selected financial ratios. Summary information provided by TRI is presented below.

Cash Year 2 Year 1

Marketable securities $400 $ 500

Accounts receivable 500 200

Inventory 3200 2,900

Total current assets 5,800 5,400

Property, plant & equipment (net) 9,900 9,000

Total assets 7,100 7,000

17,000 16,000

Accounts Payable $ 3,700 $ 3,400

Income taxes payable 900 800

Accrued expenses 1,700 1,400

Total current liabilities 6,300 5,600

Long Term debt 2,000 1,800

Total Liabilities 8,300 7,400

Common Stock $(1 par value) 2,700 2,700

Paid-in capital in excess of par 1,000 1,000

Retained earnings 5,000 4,900

Total Stockholders equity 8,700 8,600

Total Liabilities and Stockholder equity 17,000 16,000

Year 1 Year 0 Industry Average

Current Ratio 1.61 1.60 1.63

Quick Ratio 0.64 0.65 0.68

Times Interest Earned 8.55 8.60 8.45

Debt to Equity 0.86 0.75 1.03

Inventory Turnover 3.21 3.17 3.18

Required:

a. Calculate the select financial ratios for the fiscal year Year 2. (use excel )

b. Interpret what each of these financial ratios means in terms of TRI's financial stability and operating efficiency.