As the accountant for J. Martinez Manufacturing Inc., you have been requested to develop some key ratios from the comparative financial statements. This information is to be used to convince creditors that J. Martinez Manufacturing Inc. is liquid, solvent, and profitable, and that it deserves their continued support. Lenders are particularly concerned about the company’s ability to continue as a going concern.

These are the data requested and the computations developed from the financial statements:

Instructions J. Martinez Manufacturing Inc. asks you to prepare brief comments stating how each of these items supports the argument that its financial health is improving. The company wishes to use these comments to support presentation of data to its creditors. With the class divided into groups, prepare the comments as requested, giving the implications and the limitations of each item separately, and then the collective inference that may be drawn from them about J. Martinez’s financial well-being.
COMMUNICATION ACTIVITY

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Current ratio Working capital Debt to total assets ratio. Net income Profit margin ratio Return on assets ratio 2001 2000 3.1 Up 22% 2.1 Down 7% .60 .70 Up 32% Down 8% .05 .015 .09 .04