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.

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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