(Solved) : Twin Ricky Inc Tri Manufactures A Variety Of Consumer Products . . .

Twin Ricky Inc. (TRI) manufactures a variety of consumer products. The company’s founders have run the company for 30 years and now are interested in retiring. They are seeking a purchaser who will continue the company’s operations. A group of investors, Donna Inc., is looking into the acquisition of TRI.
To evaluate its financial stability and operating efficiency, Donna Inc. requested that TRI provide the latest financial statements and selected financial ratios. Summary information provided by TRI is presented below.
TRI
Statement of Income
For the Year Ended November 30, 2008
(in thousands)
Sales (net) …………..$30,500
Interest income ………….500
Total revenue …………..31,000
Costs and expenses
Cost of goods sold ………..17,600
Selling and administrative expense ……3,550
Depreciation and amortization expense …..1,890
Interest expense …………..900
Total costs and expenses ……..23,940
Income before taxes ………..7,060
Income taxes ………….2,900
Net income ………….$ 4,160

Twin Ricky Inc. (TRI) manufactures a variety of consumer product

Instructions
(a) Calculate a new set of ratios for the fiscal year 2008 for TRI based on the financial statements presented.
(b) Explain the analytical use of each of the seven ratios presented, describing what the investors can learn about TRI’s financial stability and operating efficiency.
(c) Identify two limitations of ratioanalysis.

Expert Answer

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