The financial statements of For the Kitchen include the following items:

Requirements
1. Compute the following ratios for the years ended June 30, 2011, and whenever possible for the year ended June 30, 2010. For each, indicate if the direction is favorable or unfavorable for the company.
a. Current ratio
b. Accounts receivable turnover
c. Inventory turnover ratio
d. Gross profit percentage (assume net credit sales total sales)
2. Suppose the industry average for similar retail stores for the current ratio is 1.7. Does this information help you evaluate For the Kitchen’sliquidity?

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At June 30, 2011 At June 30, At June 30, 2010 2009 Balance sheet: Cash Investments (in trading securities) Accounts receivable (net) Inventory Prepaid expenses Total current assets 17,000 10,000 54,000 75,000 16,000 172,000 12,000 16,000 50,000 70,000 12,000 14,000 20,000 48,000 73,000 10,000 165,000 160,000 Total current liabilities 0 June 30 2010 $380,000 225,000 Income statement for the year ended June 30, Net credit sales Cost of goods sold $420,000 250,000