The balance sheet for December 31 2011 income statement for
The balance sheet for December 31, 2011, income statement for the year ended De-cember 31, 2011, and the statement of cash flows for the year ended December 31, 2011, of Bernett Company are shown in the following balance sheet.
The president of Bernett Company cannot understand why Bernett is having trouble paying current obligations. He notes that business has been very good, as sales have more than doubled, and the company achieved a profit of $ 69,000 in 2011.

a. Comment on the statement of cash flows.
b. Compute the following liquidity ratios for 2011:
1. Current ratio
2. Acid- test ratio
3. Operating cash flow/current maturities of long- term debt and current notes payable
4. Cash ratio
c. Compute the following debt ratios for 2011:
1. Times interest earned
2. Debt ratio
3. Operating cash flow/total debt
d. Compute the following profitability ratios for 2011:
1. Return on assets (using average assets)
2. Return on common equity (using average common equity)
e. Compute the following investor ratio for 2011:
Operating cash flow/ cash dividends.
f. Give your opinion as to the liquidity of Bernett.
g. Give your opinion as to the debt position of Bernett.
h. Give your opinion as to the profitability of Bernett.
i. Give your opinion as to the investor ratio.
j. Give your opinion of the alternatives Bernett has in order to ensure that it can pay bills as they come due.

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