Activity Ratios: Inventory Turnover 9. Days of Inventory 10. Average Collection Period Exhibit 1 Paint Cost Sheet: Inner-City Paint Corporation 5 Gallons 5 5 Gallons Sales price Direct material Pail and lid Direct labor Manufacturing overheard ($1/gallon) Gross margin Gross profit ratio $ 27.45 (12.00) (1.72) (2.50) (5.00) $ 6.23 $ 182.75 (132.00) (8.35) (13.75) (5.00) $ 23.65 19.9% 22.7% 32.050 $294.365 Exhibit 2 Balance Sheet for the Current Year Ending June 30: Inner-City Paint Corporation Current assets Cash $ 1.595 Accounts receivable (net of allowance for bad debts of $63.400) 242,320 Inventory 18.660 Total current assets Machinery and transportation equipment 47.550 Less accumulated depreciation 15.500 Net fixed assets Total assets Current liabilities Accounts payable $217 320 Salaries payable 22.480 Notes payable 6320 Taxes payable 38 510 Total current liabilities Long-term notes payable Owners' equity Common stock, no par, 1,824 shares outstanding Deficit Total liabilities and owners' equity $285.030 15.000 12.400- (17.865) $294.565 Stanley Walsh wishes to improve the financial situation and reputation of Inner City Paint Corporation. He is considering the purchase of a computer to organize the business and reduce needless paperwork. He has read about consultants who are able to quickly spot prob. lems in businesses, but he will not spend more than $300 on such a consultant The solution that Walsh favors most is one that requires him to borrow money from the bank, which he will then use to pay his current bills. He feels that as soon as business condi- tions improve, he will be able to pay back the loans. He believes that the problems Inner City is experiencing are due to the overall poor economy and are only temporary Exhibit 3 Income Statement for the Current Year Ending June 30 Inner-City Paint Corporation Sales $1,784.000 Cost of goods sold 1.428730 Gross margin $ 355350 Selling expenses $ 72,460 Administrative expenses 67,280 President's salary 132,000 Office Manager's salary 56.000 Total expenses Net income