The purpose of this SLP is to apply ratio analysis to assess the financial health of ABC Company. Use the balance sheet presented in the case during this module to compute solvency and efficiency ratios. Compute three ratios based on balance sheet accounts for which you have sufficient information.

Assume that ABC Company is a small specialty retail store. Ratios are relevant when assessed over time or across companies. IBIS is a comprehensive resource containing market research and statistics, which can be used to compare ABC Company to the industry and leaders in the industry.

1. Show the computation of the three ratios.

2. Comment on the purpose and information conveyed by each ratio.

3. What did you learn about ABC Company by reviewing the three ratios?

4. What is your conclusion about the solvency and efficiency of the company?

5. How successful is ABC Company relative to the industry average and leaders in the small specialty retail store industry? Write two paragraphs or more. Include ratios found in the IBIS database to support your conclusion.

SLP Assignment Expectations

Show the formulas for the computations. Two to three sentences are sufficient to respond to questions 1 through 4. See above for question 5 instructions. Do not use an essay format.

Show sources when appropriate.

ABC Company Balance Sheet December 31, 20XX Assets Liabilities Current assets Current liabilities Cash S 92,000 Accounts payable $ 18,000 Accounts recievable 21,000 Interest payable 8,000 Interest receivable 1,000 Inventory 30,000 Total current assets $ 144,000 Total current liabilities $ 26,000 Long-term assets Long-term liabilities Equipment (net of depreciation) $ 128,000 Note payable 90,000 Total long-term assets S 128,000 Total long-term liabilities $ 90,000 Equity Common stock 10,000 Paid-in capital 50,000 Retained earnings 96,000 Total equity $ 156,000 Total assets $ 272,000 Total liabilities and equity | $ 272,000