Problem 2-18 Assessing Financial Performance Using Ratio Analysis The financial

Question

Problem 2-18
Assessing Financial Performance Using Ratio Analysis

The financial statements of Access Corporation for the year ended December 31, 2010, follow.

Use the preceding financial statements to complete the following table. Assume that the industry averages given in the table are applicable for both 2009 and 2010.

Access Corporation Income Statement for the Year Ended December 31, 2010 Sales revenue $160,000 Less: Cost of goods sold 96,800 Gross profit $63,200 Less: Operating expenses Selling expense $16,160 General and administrative expenses 8,320 Lease expense 2,720 Depreciation expense 8,160 Total operating expense 35,360 Operating profit $17,920 Less: Interest expense 3,520 Net profit before taxes $14,400 Less: Taxes (rate = 40%) 5,760 Net profits after taxes $8,640 Access Corporation's annual purchases are estimated to equal 75% of the cost of goods sold.

Explanation / Answer

current ratio =total current assets/ total current liabilities = 66600/68000 = 0.979 quick rati o = current assets - inventory )/ current liabilities = 66600-45000)/68000 = 0.317

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