1. (20 points) Calculate and interpret at least two ratios in each area of profitability, liquidity, solvency, and efficiency, using the information in Exhibit 3 for the year 2014.

2. (15 points) Ready Ratios provides the following average ratios for Perfumes, Cosmetics, and Other Toilet Preparations for 2016:

Gross margin ratio as 49.8 percent

Current ratio as .88

Debt-to-equity ratio as .24

Inventory turnover ratio as 98

3. What are some strengths and weaknesses of Bubble & Bee Organic identified by your ratio analysis? Discuss at least two strengths and two weaknesses.

4. What other information would be helpful to you in answering this question?

Exhibit 3: Bubble and Bee Organic Financial Statements Balance She et Assets Current Assets Cash Receivables Inventories Total Current Assets Fixed Ass ets PP\&E Less Depreciation Total Fixed Assets Total Assets \begin{tabular}{|r|r|} \hline 464,756 & 485,213 \\ \hline \end{tabular} Liabilities \& Shareholder's Equity Current Liabilities Accounts Payable Accrued Liabilities Bank Loan Total Current Liabi ong Term Liabilities Total Liabilities \begin{tabular}{|r|r|} \hline 44,625 & 53,286 \\ \hline & \\ \hline 201,796 & 159,579 \\ \hline 246,421 & 212,865 \\ \hline & \\ \hline 246,421 & 212,865 \\ \hline \end{tabular} Shareholder's Equity Member's Equity Retained Earnings Total Shareholder's Equity \begin{tabular}{|r|r|} \hline 150,000 & 150,000 \\ \hline 68,335 & 122,348 \\ \hline 218,335 & 272,348 \\ \hline \end{tabular} Total Liabilities and Share holder's Equity Exhibit 3: Bubble and Bee Organic Financial Statements (continued) Income Statement Cash Flow Statement Cash Provided (used) by Operations \begin{tabular}{l|r|} Net Income & 229,013 \\ \hline Plus Depreciation & 87,221 \\ \hline \end{tabular} Change in Working Capital \begin{tabular}{l|r|} \hline Decrease (increase) in Receivables & (3,150) \\ \hline Decrease (increase) in Inventory & (12,687) \\ \hline Increase (decrease) in Accts. Payable & 8,661 \\ \hline Increase (decrease) in Accrued Liabilities & \\ \cline { 2 } Cash Provided (used) by Operations & 309,058 \\ \hline \end{tabular} Cash Provided (used) by Investments \begin{tabular}{l|r|} Additions to PP\&E & (74,400) \\ Other Investments & \\ \hline Cash Provided (used) by Investments & (74,400) \\ \hline \end{tabular} Cash Provided (used) by Financing Activities Additions (reductions) to Debt Net issues of Stock (Dividends - Owner Draws) Cash Provided (used) by Financing Activities Net increase (decrease) in cash \begin{tabular}{|c|} \hline(42,217) \\ \hline \\ \hline(175,000) \\ \hline(217,217) \\ \hline 17,441 \\ \hline \end{tabular} Exhibit 3: Bubble and Bee Organic Financial Statements Balance She et Assets Current Assets Cash Receivables Inventories Total Current Assets Fixed Ass ets PP\&E Less Depreciation Total Fixed Assets Total Assets \begin{tabular}{|r|r|} \hline 464,756 & 485,213 \\ \hline \end{tabular} Liabilities \& Shareholder's Equity Current Liabilities Accounts Payable Accrued Liabilities Bank Loan Total Current Liabi ong Term Liabilities Total Liabilities \begin{tabular}{|r|r|} \hline 44,625 & 53,286 \\ \hline & \\ \hline 201,796 & 159,579 \\ \hline 246,421 & 212,865 \\ \hline & \\ \hline 246,421 & 212,865 \\ \hline \end{tabular} Shareholder's Equity Member's Equity Retained Earnings Total Shareholder's Equity \begin{tabular}{|r|r|} \hline 150,000 & 150,000 \\ \hline 68,335 & 122,348 \\ \hline 218,335 & 272,348 \\ \hline \end{tabular} Total Liabilities and Share holder's Equity Exhibit 3: Bubble and Bee Organic Financial Statements (continued) Income Statement Cash Flow Statement Cash Provided (used) by Operations \begin{tabular}{l|r|} Net Income & 229,013 \\ \hline Plus Depreciation & 87,221 \\ \hline \end{tabular} Change in Working Capital \begin{tabular}{l|r|} \hline Decrease (increase) in Receivables & (3,150) \\ \hline Decrease (increase) in Inventory & (12,687) \\ \hline Increase (decrease) in Accts. Payable & 8,661 \\ \hline Increase (decrease) in Accrued Liabilities & \\ \cline { 2 } Cash Provided (used) by Operations & 309,058 \\ \hline \end{tabular} Cash Provided (used) by Investments \begin{tabular}{l|r|} Additions to PP\&E & (74,400) \\ Other Investments & \\ \hline Cash Provided (used) by Investments & (74,400) \\ \hline \end{tabular} Cash Provided (used) by Financing Activities Additions (reductions) to Debt Net issues of Stock (Dividends - Owner Draws) Cash Provided (used) by Financing Activities Net increase (decrease) in cash \begin{tabular}{|c|} \hline(42,217) \\ \hline \\ \hline(175,000) \\ \hline(217,217) \\ \hline 17,441 \\ \hline \end{tabular}