Question

Trend Analysis - The following data pertain to Company A:

(in millions)	Year 2	Year 1
Revenue	$39,474	$35,137
Net income	5,658	5,642
Accounts receivable	4,389	3,725
Inventory	2,290	1,926
Total current assets	10,151	9,130
Total assets	34,628	29,930
Total current liabilities	7,753	6,860
Total long-term liabilities	9,641	7,702
Total stockholder equity	20,000	18,000

Common-Size Income Statements - Company A reported the following income statements:

COMPANY A
INCOME STATEMENT
FOR THE YEARS ENDED DECEMBER YEAR 2 AND YEAR 1
(in millions)	Year 2	Year 1
Sales revenue	$39,474	$35,137
Costs of goods sold	18,038	15,762
Gross profit	21,436	19,375
Selling and administrative expenses	14,266	12,873
Income from operations	7,170	6,502
Interest expense	(224)	(239)
Interest income	125	173
Other income	560	553
Income before income taxes	7,631	6,989
Income tax expense	1,973	1,347
Net income	5,658	5,642

Financial Ratios -

Using the data provided above, compute the following for Company A for Years 1 and Years 2.

(a) Gross profit margin ratio

(b) Return on sales

(c) Asset turnover

(d) Return on assets

(e) Working capital

(f) Current ratio

(g) Accounts receivable turnover

(h) Inventory-on-hand period

(i) Long-term debt to assets

(j) Long-term debt to equity

(k) Times-interest-earned

(l) Return on equity

Please explain the formula's utilized to answer the financial ratio's.

Answer 1