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.

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?

  • CreatedSeptember 01, 2014
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