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:

South Shore Medical Clinic

Income Statement

For the year ending December 31, 20X4

ACTUAL

BUDGET

Revenues:

Service Fee Revenue

$160,000

Total Revenues

Expenses:

Advertising Expense

$20,000

Shipping Expense

$12,000

Salaries Expense

$80,000

Rent Expense

$32,000

Utilities Expense

$5,200

Total Expenses

Income:

Net Income

$10,800

Operating Margin:

South Shore Medical Clinic
Trial Balance
December 31, 20X4
	Debit	Credit
Cash	$30,000
Accounts Receivable	60,000
Supplies	10,000
Inventory	45,000
Equipment	193,000
Building	200,000
Accounts Payable		$32,200
Current Portion - Long Term Debt		65,000
Long Term Debt, net of Current Portion		210,000
Owner's Equity		220,000
Service Fee Revenue		160,000
Advertising Expense	20,000
Shipping Expense	12,000
Salaries Expense	80,000
Rent Expense	32,000
Utilities Expense	5,200
Totals	$687,200	$687,200

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?

Expert Answer