the financial statements of builder bob s include the following items 541595
P10-7B. Calculate and analyze financial ratios. (LO 3)
The financial statements of Builder Bob’s include the following items
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the financial statements of builder bob s include the following items 541595
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Sept. 30, 2008 |
Sept. 30, 2007 |
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|
At |
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Balance sheet |
||
|
Cash |
$27,000 |
$22,000 |
|
Investments (short-term) |
15,000 |
12,000 |
|
Accounts receivable (net) |
44,000 |
40,000 |
|
Inventory |
85,000 |
75,000 |
|
Prepaid rent |
6,000 |
2,000 |
|
Total current assets |
$1 77,000 |
$151, 000 |
|
Total current liabilities |
$120,000 |
$ 80,000 |
Income statement for the year ended September 30, 2008
|
Net credit sales |
$320,000 |
|
Cost of goods sold |
150,000 |
Required
a. Compute the following ratios for the year ended September 30, 2008, and
September 30, 2007 . For each, indicate if the direction is favorable or unfavorable for the company.
1. Current ratio
2. Quick ratio
3. Accounts receivable turnover (2008 only)
4. Inventory turnover ratio (2008 only)
5. Gross margin percentage (2008 only)
b. Which financial statement users would be most interested in these ratios?
c. Suppose the industry average for similar retail stores for the current ratio is 1.2.
Does this information help you evaluate Builder Bob’s liquidity?
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