The financial statements of Builder Bobs include the following items: The income statement for the year ended

The financial statements of Builder Bob’s include the following items:

The income statement for the year ended September 30, 2010, includes the following:
Net credit sales*.... $ 320,000
Cost of goods sold..... 150,000
* Assume all sales are credit sales.

Requirements
1. Compute the following ratios for the year ended September 30, 2010, and September 30, 2009:
a. Current ratio (2009 and 2010)
b. Accounts receivable turnover (2010 only)
c. Inventory turnover ratio (2010 only)
d. Gross margin percentage (2010 only)
2. Which financial statement users would be most interested in these ratios?
3. Suppose the industry average for similar retail stores for the current ratio is 1.2. Does this information help you evaluate Builder Bob’sliquidity?

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From the balance sheet: Cash Investments (short-term) Accounts receivable (net) Inventory Prepaid rent Total current assets Total current liabilities At September 30, 2010 At September 30, 2009 27,000 15,000 4,000 85,000 6,000 $177,000 120,000 22,000 12,000 40,000 75,000 2,000 151.000 80,000