Below are the balance sheets and income statements for Penticton Inc. (Penticton) for 2013 and 2014.

Required:

a. Calculate the following for Penticton for 2014 and 2013:
i. working capital il. current ratio i. debt-to-equity ratio iv. gross margin v. gross margin percentage

b. Examine the balance sheets and income statements and explain why the amounts you calculated in

(a) changed from 2013 to 2014.

c. Comment on Penticton’s liquidity position on December 31, 2014. As a prospective lender of money to Penticton, what concerns would you have about its current liquidity position?

d. What could Penticton’s management do to improve liquidity?

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Penticton Inc. Balance Sheets As of December 31 2014 2013 2014 2013 Assets Cash Accounts receivable Inventory Equipment, furniture and fixtures (net of accumulated depreciation) Other non- Liabilities and shareholders' equity $ 12,500 $ 25,000 Bank loan $ 250,000 $ 187,500 Accounts payable 500,000 375,000 512,500 437,500 662,000 562,500 Goods to be provided to customers 105,000 87,500 Long-term debt 625,000 375,000 Shareholders' equity 1,785,500 1,325,000 Capital stock 650,000 625,000 Retained earnings 1,043,000 950,000 current assets 187,500 250,000 Total liabilities and Total assets $3,173,000 $2,600,000 shareholders' equity $3,173,000 $2,600,000