Calculate and analyze financial ratios. (LO 3)

You are interested in investing in Reese Company, and you have obtained the balance sheets for the company for the past 2 years.

The following amounts were reported on the income statement for the year ended June 30, 2007.

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a. Compute as many of the financial statement ratios you have studied as possible with the information provided for Reese Company. Some ratios can be computed for both years and others can be computed for only 1 year.

b. Would you invest in Reese Company? Why or why not? What additional information would be helpful in making this decision?

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Reese Company Balance Sheet At June 30, 2007 and 2006 2007 2006 Current assets: Cash $198,000 $ 90,000 Accounts receivable, net 210,000 116,000 Inventory 270,000 160,000 Prepaid rent 15,000 16,000 Total current assets 693,000 382,000 Equipment, net 280,000 260,000 Total assets $973,000 $642,000 Total current liabilities $306,000 $223,000 Long-term liabilities 219,000 117,000 Total liabilities 525,000 340,000 Common stockholders' equity 150,000 90,000 Retained earnings 298,000 212,000 Total liabilities and stockholders' equity $973,000 $642,000