Question

The Hill Company reported the following results:

	Year 3		Year 2		Year 1
Income Statement
Revenue	10,972		11,598		10,470
Cost of Goods Sold	8,942		8,767		7,901
Selling, General & Admin. Expenses	2,470		2,611		2,479
Interest expense	76		80		28
Net Income	(516)		140		62
Balance Sheet
Assets
Cash	1,354		1,316		1,880
Prepaid expenses	202		522		125
Accounts receivable	375		250		231
Inventory	745		698		455
Property & equipment (net)	20,464		18,810		17,727
Total Assets	23,140		21,596		20,418
Liabilities
Accounts payable	2,824		743		678
Unredeemed gift cards	410		850		636
Notes Payable	15,457		18,048		17,024
Stockholders' Equity
Common Stock	985		545		815
Retained Earnings	3,464		1,410		1,265
Total Liabilities & Equity	23,140		21,596		20,418

1.What is the company's debt ratio for Year 1? Convert your final answer to a percentage, round to one decimal place and enter without the "%" sign (e.g. a final answer of 0.105678 would be entered as 10.6).

2. What is the company's gross profit ratio for Year 3? Convert your final answer to a percentage, round to one decimal place and enter without the "%" sign (e.g. a final answer of 0.105678 would be entered as 10.6).

3.What is the company's net profit ratio for Year 2? Convert your final answer to a percentage, round to one decimal place and enter without the "%" sign (e.g. a final answer of 0.105678 would be entered as 10.6).

4. What is the company's return on investment ratio for Year 1? Convert your final answer to a percentage, round to one decimal place and enter without the "%" sign (e.g. a final answer of 0.105678 would be entered as 10.6)

5. Based on the three years of data, the company's return on investment ratio has

A. improved
B. worsened.
C. stayed the same.

Answer 1

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The Hill Company
Statement of Earnings	Year 3	Year 2	Year 1
Revenue	10,972.00	11,598.00	10,470.00
Cost of goods sold	8,942.00	8,767.00	7,901.00
Gross Margin	2,030.00	2,831.00	2,569.00
Selling and admin Expenses	2,470.00	2,611.00	2,479.00
Net operating Income	(440.00)	220.00	90.00
Interest Expense	76.00	80.00	28.00
Net Income	(516.00)	140.00	62.00
Statement of Financial Position
Assets	Year 3	Year 2	Year 1
Current Assets
Cash	1,354.00	1,316.00	1,880.00
Accounts Receivable (Net)	375.00	250.00	231.00
Inventory	745.00	698.00	455.00
Prepaid Expense	202.00	522.00	125.00
Total Current Assets	2,676.00	2,786.00	2,691.00
Property Plant & Equipment (Net)	20,464.00	18,810.00	17,727.00
Total Assets	23,140.00	21,596.00	20,418.00
Liabilities & Stockholders' Equity	Year 3	Year 2	Year 1
Liabilities
Current Liabilities
Accounts payable	2,824.00	743.00	678.00
Unredeemed gift cards	410.00	850.00	636.00
Current Liabilities	3,234.00	1,593.00	1,314.00
Notes Payable	15,457.00	18,048.00	17,024.00
Total Liabilities	18,691.00	19,641.00	18,338.00
Stockholders' Equity
Common Stock	985.00	545.00	815.00
Retained Earnings	3,464.00	1,410.00	1,265.00
Total Stockholders' Equity	4,449.00	1,955.00	2,080.00
Total Liabilities & Stockholders' Equity	23,140.00	21,596.00	20,418.00

Answer 1
Debt ratio	Year 1
Total Liabilities / Total Assets	89.8%
Answer 2	Year 3
Gross profit ratio
Gross profit / Total Revenue	18.5%
Answer 3	Year 2
Net profit ratio
Net Income / Total Revenue	1.2%

Answer 4	Year 1	Year 2	Year 3
Return on investment ratio
Net operating Income / Total Assets	0.4%	1.0%	-1.9%

Answer 5

Based on the three years of data, we can see that the company's return on investment ratio has worsened. (Option B)