Hurstwood Wineries Ltd. (Hurstwood) produces and markets wines from its vineyards in Ontario and B.C. You have been provided with the following income statements and balance sheets for Hurstwood:

Required:

a. Compute the following ratios and amounts for Hurstwood for 2014 and 2013:
i. gross margin percentage il. profit margin percentage ili. earnings per share iv. working capital v. current ratio vi. quick ratio vii. debt-to-equity ratio vill. interest coverage ratio ix. dividend payout ratio

b. Compute the following ratios and amounts for Hurstwood for 2014:
i, asset turnover ii. return on equity ili. return on assets iv. inventory turnover ratio v. average number of days inventory on hand vi. accounts receivable turnover ratio vil. average collection period of accounts receivable vill. accounts payable turnover ratio ix. average payment period for accounts payable x. cash lag

c. How do the unusual items reported on the 2014 and 2013 income statements affect your ability to predict Hurstwood’s future performance?

d. Comment on Hurstwood’s liquidity, based on amounts you calculated in

(a) and (b). Be sure to consider the nature of Hurstwood’s business in your response.

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Hurstwood Wineries Ltd. Income Statements for the Years Ended March 31 (in thousands of dollars) 2014 2013 Credit sales $43,667 $43,433 Cost of goods sold 27,732 27,408 Gross profit 15,935 16,025 Selling and administration 11,281 10,647 Earnings before interest and depreciation 4,654 5,378 Interest 717 781 Depreciation 1,350 1,241 Earnings before unusual items 2,587 3,356 Unusual items (loss) (485) 3,125 Earnings before income taxes 2,102 6,481 Provision for (recovery of) income taxes: Current 1,084 1,817 Future (147) 232 937 2,049 Net earnings for the year 1,165 4,432 Retained earnings-beginning of year 20,453 16,985 Dividends on common shares 964 964 Retained earnings-end of year $20,654 $20,453