Calculate financial ratios and Prepare an Executive Summary

Ratio Analysis The Vanguard Group, Inc. has compiled the following financial statements and comparative financial ratios for the year-end review.

Balance Sheet Vanguard Group, Inc.

December 31, 2007

Assets Current assets

Cash $ 118,750 Accounts receivable 296,250

Inventory 303,750 Total current assets $ 718,750

Gross fixed assets $625,000 Less: Accumulated depreciation 93,750 Net fixed assets 531,250 Total assets $1,250,000 Liabilities and stockholders’ equity Current liabilities

Accounts payable $ 111,250 Notes payable 211,250

Accruals 108,750 Total current liabilities $ 431,250 Long-term debt 235,000 Total liabilities $ 666,250 Stockholders’ equity Common stock 318,750

Retained earnings 265,000 Total stockholders’ equity $ 583,750 Total liabilities and stockholders’ equity $1,250,000

Income Statement Vanguard Group, Inc.

for the Year Ended December 31, 2007

Sales revenue $1,680,000 Cost of sales 1,362,480 Gross profits $ 317,520 Less: Operating expenses Selling expense $ 125,600

General and administrative expense 81,600 Depreciation expense 24,000

Total operating expense $231,200 Operating profits $ 86,320 Less: Interest expense 15,600 Net profits before taxes $ 70,720 Less: Taxes (40%) 28,288 Net profits after taxes $ 42,432

Historical and Industry Average Ratios Vanguard Group, Inc.

Industry Average Ratio 2005 2006 2007 2007

Current ratio 1.6 1.7 — 1.6 Quick ratio 0.9 1.0 — 0.9 Inventory turnover 6.0 5.0 — 8.4 Average collection period 40 days 50 days — 40 days Total asset turnover 1.5 1.5 — 1.75 Debt ratio 60% 56% — 50% Times interest earned 2.5 3.5 — 4.0 Gross profit margin 20% 19.7% — 20% Operating profit margin 4.7% 4.8% — 6% Net profit margin 2.0% 2.3% — 3% Return on investment 3.0% 3.5% — 5.25% Return on equity 7.5% 7.95% — 10.5%