You have recently been hired as an internal analyst at Hone Inc., reporting directly to the owner. The owner has requested you compare the operations and financial position of Hone Inc. with Poot Inc. Poot has already been determined to serve as a reasonable basis for comparison. Below are the comparative condensed statements of comprehensive income and comparative statements of financial position for Hone Inc. and Poot Inc.

Required:In order to compare the operations and financial positions of Hone Inc. and Poot Inc. you must do the following:

a. Prepare a vertical analysis on the statements of comprehensive income for both companies for 20X4 and 20X5.

b. Calculate the following ratios for both companies for 20X4 and 20X5: current ratio, quick ratio, debt-to-equity ratio, return on total assets, return on equity. Round to two decimal places.?

c. Conclude on the liquidity, solvency, and profitability of Hone Inc. compared to Poot Inc. based on your ratio calculations.

Transcribed Image Text:

Statements of Comprehensive Income Sales revenue Cost of sales Operating expenses, including income tax Net income and comprehensive income HONE INC. 20X5 $900,000 534,000 206,500 159,500 20X4 $822,000 400,000 199,000 223,000 POOT INC. 20X5 $3,000,000 1,700,000 1,140,000 160,000 20X4 $2,600,000 1,500,000 970,000 130,000