Amerbrand Company (B)

Using the 2016 and 2017 balance sheets contained in Amerbrand Company (A) together with the 2017 income

statement in the (A) case and the 2016 income statement shown in Exhibit 1, calculate the ratios listed

below for 2016 and 2017. Use year-end amounts for ratios that involve balance sheet data. The company’s interest

expense in 2016 and 2017 respectively was (in thousands) $105,165 and $102,791.

1. Return on assets                                8. Return on equity

2. Gross margin percentage                 9. Return on sales

3. Asset turnover                                 10. Days’ cash

4. Days’ receivables                            11. Days’ inventories

5. Inventory turnover                         12. Current ratio

6. Acid-test ratio                                 13. Debt-capitalization ratio

7. Times interest earned

Assignment

1. Comment on Amerbrand's treatment of excise taxes as part of the calculation of gross margin.

2. As an outside analyst, what questions would you want to ask Amerbrand's management based on the

ratios you have calculated?