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Using the 2007 & 2008 Income Statement and Balance Sheet provided, calculate the following…
Liquidity ratios• Current ratio• Acid-test, or quick, ratio• Receivables turnover• Inventory turnover
Profitability ratios• Asset turnover• Profit margin• Return on assets• Return on common stockholders’ equity
Solvency ratios• Debt to total assets• Times interest earned
Please be sure to also do the following…
1. Show your calculations for each ratio2. Create a horizontal and vertical analysis for the balance sheet and the income statement3. Write a 350- to 700-word memo to the CEO of your selected organization (Berry’s Bug Busters) in which you discuss your findings from your ratio calculations and your horizontal and vertical analysis. In your memo, address the following questions:
a) What do the liquidity, profitability, and solvency ratios reveal about the financial position of the company?b) Which users may be interested in each type of ratio?c) What does the collected data reveal about the performance and position of the company
Income
Statement 2008 & 2007
1/1/2008-12/31/2008
Revenue
$3,249,580.53
Direct Expenses
Salaries & Wages $487,437.08
Vehicle Maintenance $64,991.61
Fuel $20,449.80
Traps & Chemicals $1,378,203.63
$1,951,082.12
Indirect Expenses
Rent
$39,338.17
Licenses $2,480.00
Insurance $103,613.43
Administrative Salaries $150,250.00
Commissions $16,991.61
Payroll Taxes $72,014.66
Legal Expenses $12,000.00
Accounting Fees $7,000.00
Office Supplies $7,800.00
Utilities $10,806.40
Advertising Expenses $116,000.00
Bad Debts $122,138.64
Depreciation Expense $94,925.75
Misc. Expense $50,000.00
$805,358.66
Total Expenses
$2,756,440.78
Net Income
$493,139.75
1/1/2007-12/31/2007
Revenue $3,893,027.78
Direct Expenses
Salaries& Wages $583,954.17
Traps & Chemicals $1,651,100.81
Fuel $19,177.32
Vehicle Maintenance $77,860.56
$2,332,092.85
Indirect Expenses
Rent $38,192.40
Licenses $2,480.00
Interest Expense $0.00
Insurance $103,613.43
Admin. Salaries $133,500.00
Commissions $52,860.49
Payroll Taxes $84,734.61
Legal Expenses $12,000.00
Accounting Fees $7,000.00
Office Supplies $7,800.00
Utilities $9,824.00
Advertising Expenses $81,510.00
Bad Debts $103,493.45
Depreciation Expense $94,925.75
Misc. Expenses $60,000.00
$791,934.13
$3,124,026.98
Net Income $769,000.80
Balance Sheet 2008 & 2007
12/31/2008
Current Assets
Cash $818,440.68
Accounts Receivable $812,395.13
Inventory $205,934.30
Total Current Assets $1,836,770.12
Fixed Assets
Vehicles $268,750.00
Tools $110,953.00
Less Accumulated Depreciation ($284,431.95)
Total Fixed Assets $95,271.05
Total Assets $1,932,041.17
Liabilities
Current Liabilities
Accrued Payroll Taxes $36,007.33
Accounts Payable $270,798.38
Total Current Liabilities $306,805.71
Long-Term Liabilities
$0.00
Total Liabilities $306,805.71
Stockholders’ Equity
Common Stock (1,000,000 authorized shares at $1 par) $70,000.00
Retained Earnings $1,062,095.71
Net Income $493,139.75
Total Stockholders’ Equity $1,625,235.46
Total Liabilities & Stockholders’ Equity $1,932,041.17
12/31/2007
Current Assets
Cash $291,703.44
Accounts Receivable $811,047.45
Inventory $205,934.30
Total Current Assets $1,308,685.20
Fixed Assets
Vehicles $268,750.00
Tools $110,953.00
Less Accumulated Depreciation ($189,506.20)
Total Fixed Assets $190,196.80
Total Assets $1,498,882.00
Liabilities
Current Liabilities
Accrued Payroll Taxes $42,367.31
Accounts Payable $324,418.98
Total Current Liabilities $366,786.29
Long‐Term Liabilities
Auto Loans $0.00
Total Long‐Term Liabilities $0.00
Total Liabilities $366,786.29
Stockholders’ Equity
Common Stock (1,000,000 authorized shares at $1 par) $70,000.00
Retained Earnings $293,094.91
Net Income $769,000.80
Total Stockholders’ Equity $1,132,095.71
Total Liabilities & Stockholders’ Equity $1,498,882.00
Instructions:
Using the 2007 & 2008 Income Statement and Balance Sheet provided, calculate the following…
Liquidity ratios
· Current ratio
· Acid-test, or quick, ratio
· Receivables turnover
· Inventory turnover
Profitability ratios
· Asset turnover
· Profit margin
· Return on assets
· Return on common stockholders’ equity
Solvency ratios
· Debt to total assets
· Times interest earned
Please be sure to also do the following…
1. Show your calculations for each ratio
2. Create a horizontal and vertical analysis for the balance sheet and the income statement
3. Write a 350- to 700-word memo to the CEO of your selected organization (Berry’s Bug Busters) in which you discuss your findings from your ratio calculations and your horizontal and vertical analysis. In your memo, address the following questions:
a) What do the liquidity, profitability, and solvency ratios reveal about the financial position of the company?
b) Which users may be interested in each type of ratio?
c) What does the collected data reveal about eh performance and position of the company
