Income Statements and Balance Sheet Ratios

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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 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 the performance and position of the company