Compute the following ratios:

Net Profit Margin

Quick ratio. QR = Cash + cash equivalents (receivables) / CL

Asset turnover ratio (use ending total assets balance, not average assets)

Provide a qualitative evaluation of these three ratios. Include in your analysis these items: What does each illustrate, specifically, to CHs performance? What is the impact of having just one month of business on any/all of the ratios? Based on the given information, what is the reliability of these values, and what would strength the signal provided by the ratios?

CH, Inc., an electrical contractor is formed in the last month of December. The following transactions are completed in December. It is determined that the truck asset has an expected useful life of 5 years with $2000 salvage value, and the firm will use the straight-line method to determine depreciation.

The transactions are listed as of the date of the transaction:

12/1 To establish the company, Owner transfers $56,000 cash from savings to a business checking account, CH, Inc

12/1 Owner purchases a used truck for the business for $20,000, paying $10,000 in cash with the remaining balance using a note payable, to be paid within 12 months.

12/2 Rents office space for $800 rent for the month of December

12/3 Purchases $14,000 of electrical equipment, paying $3,200 in cash, with the balance to be paid within 60 days

12/5 Purchases $900 of office supplies using cash

12/6 Completed a job and collected $1,000 cash for the work

12/8 Purchased $3800 of electrical equipment on credit

12/15 Completed a $4000 job, and invoiced the client. Used $1500 of electrical supplies to complete this work.

12/18 Purchased $500 of office supplies on credit

12/20 Paid $3800 cash for the equipment purchases on 12/8

12/24 Billed a client $1200 for work completed, payment due in 30 days. Used $250 of electrical supplies to complete this work.

12/28 Collected $4,000 cash for work completed on 12/15

12/29 Paid office wages of $12,000 for the month

12/30 Paid $440 for December utilities

12/31 Owner withdrew $700 cash for December Salary

12/31 Recorded December depreciation expense on truck