In Chapter 11 we prepared a cash flow statement for
In Chapter 11, we prepared a cash flow statement for Aqua Elite, Inc. Now, we will analyze Aqua Elite’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, 2015 and the income statement for the month ended July 31, 2015, for Aqua Elite, Inc.
Aqua Elite, Inc.
Income Statement
Month ended July 31, 2015
Revenue .......... $6,300
Expenses:
Cost of Goods Sold ........ 1,080
Depreciation Expense ........ 305
Bad Debt Expense ........ 220
Interest Expense ........ 375
Insurance Expense ........ 150
Supplies Expense ........ 210
Salary Expense ........ 2,400
Payroll Taxes Expense ........ 268
Bank Service Fees ........ 30
Net Income* ........... $1,262
Requirements
1. Prepare a vertical analysis of the income statement using a multi-step income statement.
2. Calculate the current ratio for Aqua Elite, Inc. at July 31, 2015.
3. Calculate the quick ratio for Aqua Elite, Inc. at July 31, 2015.
4. Why do you think the current and quick ratios are unfavorable? Do you believe that this is a temporary problem or a long-term problem?
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