Solved: 1 Using the South Plains Chemical Company

figures compute the

1. Using the South Plains Chemical Company figures, compute the following ratios.

2. Compare the company ratios you prepared to the industry figures given in part a. What are
the company’s strengths? What are its weaknesses?

3. What is your overall assessment of South Plains Chemical? Do you think Jack should
continue with his evaluation of the stock? Explain.

Jack Arnold is a resident of Lubbock, Texas, where he is a prosperous rancher and

businessman. He has also built up a sizable portfolio of common stock, which, he believes, is
due to the fact that he thoroughly evaluates each stock he invests in. As Jack says, “Y’all can’t
be too careful about these things! Anytime I’m fixin’ to invest in a stock, you can bet I’m gonna
learn as much as I can about the company.” Jack prefers to compute his own ratios even
though he could easily obtain analytical reports from his broker at no cost. (In fact, Billy Bob
Smith, his broker, has been volunteering such services for years.)

Recently Jack has been keeping an eye on a small chemical stock. The firm, South Plains

Chemical Company is big in the fertilizer business—which is something Jack knows a lot about.
Not long ago, he received a copy of the firm’s latest financial statements (summarized here)
and decided to take a closer look at the company.

1 Using the South Plains Chemical Company figures compute the

ANSWER
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