Financial Rations

Instructions: Use the financial statements provided below to calculate the following financial ratios: write your own assessment of the company's financial performance, using those ratios to support your conclusion. What can you conclude about the company's liquidity, solvency, and profitability? Be sure to include the ratios calculations to support your conclusions.

	2012	2011
1. Current Ratio
2. Quick Ratio
3. Long-Term Debt-to-Equity Ratio
4. Debt-to-Equity Ratio
5. Long-Term Debt Ratio
6. Accounts Receivable Turnover Ratio (Assume that 60% of Sales are credit)
7. Inventory Turnover Ratio (Assume 2011 beginning inventory was -0-.)
8. Asset Turnover Ratio
9. Gross Profit Percentage
10. Net Profit Margin Percentage
11. Return on Assets
12. Return on Equity

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Comparative Balance Sheets
	2012	2011
Assets
Current Assets
Cash	$198,456	$147,333
Accounts Receivable	4,000	5,000
Allowance for Uncollectible Accounts	(250)	80
Supplies	200	250
Inventory	35,000	32,000
Total current assets	237,406	184,663
Property, Plant, and Equipment
Equipment	60,000	15,000
Accumulated Depreciation - Equipment	(14,000)	(1,000)
Vehicles	35,000	35,000
Accumulated Depreciation - Vehicles	(4,800)	(2,400)
Building	684,375	684,375
Accumulated Depreciation - Building	(25,000)	(12,500)
Land	46,875	46,875
Land Improvements	23,750	23,750
Accumulated Depreciation - Land Improvements	(2,539)	(663)
Total PP&E	803,661	788,437
Total Assets	$1,041,067	$973,100
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable	$20,000	$24,000
Wages Payable	1,000	500
Warranties Payable	750	500
Notes Payable	0	2,500
Total current liabilities	21,750	27,500
Long-term Liabilities
Bonds Payable	750,000	450,000
Mortgage Payable	0	300,000
Total long-term liabilities	750,000	750,000
Total liabilities	771,750	777,500
Stockholders' Equity
Common Stock	125,000	125,000
Paid-in capital in excess of par - common	25,000	25,000
Preferred Stock	40,000	20,000
Paid-in capital in excess of par - preferred	25,000	15,000
Less: Treasury Stock	(3,000)	(3,000)
Paid-in capital - treasury stock	500	500
Retained Earnings	56,817	13,100
Total stockholders' equity	269,317	195,600
Total liabilities and stockholders' equity	$1,041,067	$973,100

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Comparative Income Statements
	2012	2011
Service Revenue	$93,693	$50,230
Sales	76,250	24,000
Cost of Goods Sold	(45,750)	(14,400)
Gross Margin	$124,193	$59,830
Operating Expenses:
Advertising Expense	$7,500	$5,000
Bad Debt Expense	330	0
Depreciation Expense - Equipment	13,000	5,667
Depreciation Expense - Vehicles	2,400	2,400
Depreciation Expense - Building	12,500	12,500
Depreciation Expense - Land Improvements	1,876	663
Wages Expense	22,870	10,500
Total Expenses	60,476	36,730
Net Income	$63,717	$23,100