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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Aqua Elite, Inc. Comparative Balance Sheets July 31 and June 30, 2015 JULY 31 JUNE 30 Assets Cash Accounts Receivable, Net Inventory Supplies S 5,333 2,280 4,175 105 11,893 67,250 (352) 66,898 $78,791 $3,270 1,000 180 125 4,575 2,250 47 2,203 $6,778 Total Current Assets Fixed Assets Less: Accumulated Depreciation 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 S 1,805 5,800 950 450 2,000 17 2,000 5,367 4,410 14,028 20,000 42,590 76,618 Total Current Liabilities Notes Payable Mortgage Payable Total Liabilities Shareholders' Equity Common Shares Retained Earnings Total Shareholders' Equity Total Liabilities & Shareholders' Equity 5,367 1,000 1,173 2,173 $78,791 1,000 411 1,411 $6,778