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
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?