Comparative financial statements for The Rose Packing Corporation are shown below.

Additional information:

1. All sales were on account.

2. The allowance for doubtful accounts was $5,500 in 2021 and $4,500 in 2020.

3. In 2021, $23,620 of dividends were paid to the common shareholders.

4. Cash provided by operating activities was $116,780.

5. Cash used by investing activities was $51,660.

Instructions

Calculate all possible liquidity, solvency, and profitability ratios for 2021.

Taking It Further

Based on the ratios you have calculated for 2021, can you determine whether Rose Packing?s liquidity, solvency, and profitability are strong or weak? If not, what additional information would you require?

Transcribed Image Text:

THE ROSE PACKING CORPORATION Income Statement Year Ended December 31 2021 2020 Net sales $790,000 $624,000 405,600 Cost of goods sold 540,000 Gross profit Operating expenses 250,000 218,400 153,880 149,760 Profit from operations 96,120 68,640 Interest expense Loss on sale of equipment 3,200 1,200 6,720 6,000 Profit before income tax 86,200 61,440 Income tax expense 12,930 9,216 Profit $ 73,270 $ 52,224