BUS 616 Summer 2015 Quiz #2

Given below are balance sheets for Vernon's Shoppe, Inc. for a three year period, plus some additional information.

Required:

1) on this tab, compute the rates of change for each balance sheet account for 20x2 and 20x3

2) on the second tab, compute the ratios specified (make sure your calculations can be clearly followed), and provide analysis

Vernon's Shoppe, Inc.

Balance Sheets

As of December 31, 20x3, 20x2, and 20x1

20x3 20x2 20x1

Assets

Cash 10,821 48,369 57,263

Accounts receivable (net) 342,660 318,275 341,512

Inventory 443,528 286,311 256,400

Prepaid expenses 37,606 17,530 15,428

Total Current Assets 834,615 670,485 670,603

Plant and Equipment (net) 735,218 707,522 656,419

Total Assets 1,569,833 1,378,007 1,327,022

Liabilities and Owner Equity

Liabilities

Accounts payable 396,310 321,517 300,567

Accrued expenses 275,381 260,049 243,812

Total Current Liabilities 671,691 581,566 544,379

Long Term Notes Payable 350,000 300,000 300,000

Common Stock 10,000 10,000 10,000

Retained Earnings 538,142 486,441 472,643

Total Liabilities and Owner Equity 1,569,833 1,378,007 1,327,022

Sales (from Income Statement) 1,808,422 1,631,509 1,521,344

Also note:

Gross margin remains constant at 40% of sales each year

Allowance for bad debts is $20,000 each year

Compute the following:

Current ratio for all three years

Quick ratio for all three years

Inventory turnover for 20x2 and 20x3

Days sales in accounts receivable for all three years

Provide a brief assessment of the company's liquidity position, including trends and areas of concern.

Limit your answer to about eight lines that fit on the screen.