One day while Jane was at Bowden Brake Service getting her brakes repaired, Jim storms into his office, slamming doors and shouting about the local financial institutions. After a few minutes of building her courage, jane approach Jim and ask him what the problem is. He shouts, "It's the financial institutions in this town! Not one of them will lend me the money I need to expand my business. They all said I needed to take a closer look at my financial position before I consider expanding. One of them said something about ratio analysis. I know a lot about cars and brakes, but what is ratio analysis?" Jane told Jim she will perform a ratio analysis for the business if he gives her a free brake job. Jim provides her with the following financial statements.

Bowden Brake Service Income Statement

Year Ending December 31, 20xx

Net Sales $780,000 Costs of Goods Sold: Beginning Inventory $104,000 Purchases 526,480 Goods Available for Sale $630,480 Ending Inventory 134,400 Costs of Goods Sold 496,080 Gross Margin $283,920 Operating Expenses: Rent 24,000 Insurance 5,250 Advertising 6,000 Travel 2,500 Interest 72,750 Taxes (Property, etc.) 2,500 Salaries & Admin. Expenses 97,000 Utilities 12,500 Supplies 1,360 Total Operating Expenses $223,860 Net Profit $60,060 Bowden Brake Service Balance Sheet December 31, 20xx Assets Current Assets: Cash $20,000 Accounts Receivable 10,000 Notes Receivable 5,000 Inventory 134,400 Total Current Assets $169,400 Fixed Assets: Land 147,000 Machinery 73,000 Equipment 160,800 Less Accumulated Depreciation (30,200) 203,600 Total Fixed Assets 350,600 Total Assets $520,000 Liabilities & Owner's Equity Current Liabilities: Accounts Payable 40,500 Notes Payable 20,200 Accrued Salaries Payable 4,300 Total Current Liabilities: 65,000 Long-term Liabilities: Long-term Loan 325,000 Total Liabilities $390,000 Owner's Equity, Jim Bowden $130,000 Total Liabilities and Net Worth $520,000

. Refer to the income statement and balance sheet. Prepare a ratio analysis for Bowden Brake Service. In addition, use the following industry statistics for firms like Jim's to explain and interpret what these ratios mean.