Compute the following listed ratios for 2006 and 2005 showing supporting calculations. (a)Current ratio = . (b)Debt to total assets = . (c)Times interest earned = . (d)Inventory turnover = . (e)Profit margin ratio = . (f)Return on common stockholders’ equity = . (g)Return on assets = . Title| Formula| 2006| Solution| 2005| Solution| Current Ratio| Current assetcurrent liability| 220,00080,000| 2. 5| 280,000140,000| 2| Debt to total asset| long term debt+current liabiltytotal asset| 300,000+80,0001,000,000| 0. 38| 320,000+140,0001,080,000| 0. 425| Times interest earned| Earnings before taxes+interstInterest expenses| 395,000+30,00030,000| 14. 16| 220,000+30,00030,000| 8. 3| Inventory| Cost of good soldinventory| 1,080,000120,000| 9| 1,750,000150,000| 11. 667| Profit margin| Net incomeSales*100| 255,0002,000,000*100| 12. 75%| 143,0002,500,000*100| 5. 72%| Return on Common Stock| Net incomeStock equity| 255,000620,000| 41. %| 143,000620,000| 23%| Return on Assets| Net incometotal assets| 255,0001,000,000| 25. 5%| 143,0001,080,000| 13. 2%| 2. Horizontal and Vertical analysis for Balance Sheet (cont. ’)Horizontal and vertical income statement The income statement and balance sheet are very important in determining how profitable the company has been when looking at trends. As the company looks at the horizontal and vertical analysis for the past two years, we have found that the net income has increased.The income statement shows that the cost of goods sold decreased by 16%, selling and administrative expenses increased by 5%, and interest expense stayed the same when comparing it to the previous year. The balance sheet we can determine that the assets and liabilities both decreased. The company’s overall expenses decreased in the past year along with the company’s revenues, but the profit increased. So the company on a whole is making an upward swing towards being more successful.