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Read the scenario below and answer the following 3 questions (be sure to scroll down). You will also need to complete the Budget on the

Read the scenario below and answer the following 3 questions (be sure to scroll down). You will also need to complete the Budget on the "Income Statement & Budget" tab. Scenario: South Shore Medical Clinic is expanding its operations. As you will notice from Year 3 to Year 4, they have increased their revenue and encounted additional expenses. In addition, they have rented a new office at the end of the year so their rent expense is going to increase (they will now have two offices). In addition, they have added 2 additional staff members to payroll. Using the Income Statement, prepare a budget that takes these changes into account for the upcoming year.
Questions:
1. Using the Balance Sheet, calculate the current ratio. Comment on whether or not the ratio shows financial strength.
2. Using the Income Statement, calculate the operating margin ratio for Year 4. How well does the company measure in terms of operating efficiency?
3. Explain your budget suggestions. Do you think Revenue will increase or decrease? Do you think Expenses will increase or decrease?
South Shore Medical Clinic
Balance Sheet
December 31, 20X4
ASSETS LIABILITIES & NET WORTH
Current Assets Current Liabilities
Cash $ 30,000 Accounts Payable $ 32,200
Accounts Receivable $ 60,000 Current Portion - Long Term Debt $ 65,000
Supplies $ 10,000 Total Current Liabilities $ 97,200
Inventory $ 45,000
Total Current Assets $ 145,000 Non-current Liabilities
Long Term Debt, net of Current Portion $ 210,000
Non-current Assets Total Non-Current Liabilities $ 210,000
Equipment $ 193,000
Building $ 200,000 NET WORTH
Total Non-current Assets $ 393,000 Owner's Equity $ 230,800
TOTAL ASSETS $ 538,000 TOTAL LIABILITIES & NET WORTH $ 538,000
Current Ratio: 1.49

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