You have been given the following data on a competitor

4. You have been given the following data on a competitor:Balance Sheets 1998 1999 Cash $ 57,600 $ 52,000Accounts receivable 351,200 402,000Inventory 715,200 836,000 Total current assets $ 1,124,000 $ 1,290,000Gross Fixed assets $ 491,000 $ 527,000Less: Accumulated Depreciation 146,200 166,200 Net fixed assets $ 344,800 $ 360,800Total assets $ 1,468,800 $1,650,800Accounts Payable $ 145,600 $ 175,200Notes Payable 200,000 225,000Accruals 136,000 140,000 Total current liabilities $ 481,600 $ 540,200Long-term debt 323,432 424,612Common stock 460,000 460,000Retained earnings 203,768 225,988 Total equity $ 663,768 $ 685,988Total claims $ 1,468,800 $ 1,650,800Income StatementsSales $ 3,432,000 $ 3,850,000Cost of goods sold 2,864,000 3,250,000Other expenses 340,000 430,300Depreciation 18,900 20,000 EBIT $ 209,100 $ 149,700Interest expense 62,500 76,000 EBIT $ 146,600 $ 73,700Taxes (40%) 58,640 29,480Net income $ 87,960 $ 44,220Other dataDecember 31 stock price $8.50 $6.00Number of share outstanding 100,000 100,000Dividend per share $0.22 $0.22Annual lease payment $40,000 $40,000Engineering Management 535 (cont’d) Page 4.Problem 4 cont’d: Industry Ratio AverageCurrent 2.7xQuick 1.0xInventory turnover 7.0xDays sales outstanding (DSO) 32.0 daysFixed asset turnover 10.7xTotal asset turnover 2.6xDebt ratio 50.0%TIE 2.5xFixed charge coverage 2.1xProfit margin 3.5%Basic earning power 19.1%ROA 9.1%ROE 18.2%P/E 14.2xM/B 1.40xDefine the term “liquidity” within a financial statement analysis context. What are the current and quick ratios? Assess the firm’s liquidity position.What are the inventory turnover, days sales outstanding, fixed asset turnover, and total asset turnover? How do the firm’s asset utilization ratios stack up against the industry averages?What are the debt, times-interest-earned, and fixed charge coverage ratios? How does it compare with the industry with respect to financial leverage?Calculate the profitability ratios, that is, its profit margin, return on assets (ROA), return on equity (ROE).What is common size analysis? Briefly describe how it an be applied to income statements and balance sheets. Does common size analysis replace ratio analysis, or should it be used to supplement ratio analysis?