The lenders of r. soukup Industries have asked you (the accountant) to prepare the following ratios for the company from their comparative financial statements. They are concerned about soukup’s ability to continue as a going concern. The ratios are as follows:

2004 2003

Current ratio 3.1 2.1

Working capital up 22% down 7%

Debt to total assets 0.60 0.70
Net income up 32% down 8%

Earnings per share $2.40 $1.15

Price-earnings ratio 26.2 19.5

Defend the company’s argument that its financial health is improving by citing the implications and limitations of each ratio listed.

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