In Chapter 11, we prepared a cash flow statement for Pure Water, Inc. Now, we will analyze Pure Water€™s financial statements using the tools we learned in this chapter. Following are the balance sheets for the months ended July 31 and June 30, 2013 and the income statement for the month ended July 31, 2013, for Pure Water, Inc.

Requirements
1. Prepare a vertical analysis of the income statement using a multi-step income statement. Round percentages to one-tenth of a percent.
2. Calculate the current ratio for Pure Water, Inc., at July 31, 2013.
3. Calculate the quick ratio for Pure Water, Inc., at July 31, 201 3.
4. Why do you think the current and quick ratios are unfavorable? Do you believe that this is a temporary problem or a long-termproblem?

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Pure Water, Inc Comparative Balance Sheets Juty 31 and June 30, 2013 JULY 31 JUNE 30 Assets Cash Accounts Receivable, Net Inventory Supplies S3,910 1,000 160 150 5,220 3,500 S 3,058 6,520 3,500 Total Current Assets Fixed Assets Less: Accumulated Depreciation 13,133 59.200 (617 Net Fixed Assets Total Assets Liabilities Accounts Payable Unearned Revenue Salary Payable Interest Payable Payroll Taxes Payable Dividend Payable Current Portion of Long-Term Debt 8,643 S1,550 6,600 925 588 158 1200 S 550 4,000 825 25 500 5,900 Total Current Liabilities Notes Payable Mortgage Payable Total Liabilities Stockholders Equity Common Stock Retained Earnings Total Stockholders Equity Total Liabilities & Stockholders' Equity 13,246 12,700 67.221 5,900 900 3,595 4.495 S71,716 900 1,843 2,743 Pure Water, Inc. Income Statement Month Ended July 31, 2013 Net Sales Expenses Cost of Goods Sold Depreciation Expense Bad Debt Expense Interest Expense Insurance Expense Supplies Expense Salaries Expense Payroli Taxes Expense Bank Service Fees Net Income S12.000 1,920 540 456 588 288 276 4,440 468 72