RATIO ANALYSIS

Required:

1. Complete the required calculations. Round all answers two decimal places.

2. What conclusion can be drawn from each of the financial ratio areas you calculated above? Compare 2022 to 2021 and 2020 to identify trends. Also compare to the industry averages found attached to this problem.

3. Was The Windy West Company wise to expand operations? Yes or no and a brief explanation.

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The following are condensed financial statements of The Windy West Company for the three years ended December 31, 2020, 2021, 2022. The Windy West Company expanded their business in 2021-2022. The Windy West Company Comparative Balance Sheets December 31 (thousands of $) 2022 Current Assets Cash 2021 2020 $ 450 $ 50 $ 200 Accounts Receivable $ 590 $ 480 $ 240 Less: Allowance for Doubtful Accounts 50 540 20 460 240 Inventory Prepaid Expenses 750 130 Total Current Assets Capital Assets Less: Accumulated Depreciation 500 100 $ 1,870 $ 1,060 $ 1,040 4,050 2,340 1,380 930 3,120 540 1,800 270 1,110 $ 4,990 $ 2,860 $ 2,150 520 30 Total Assets Current Liabilities Accounts Payable Accrued Liabilities Total Current Liabilities Bonds Payable Total Liabilities Shareholders' Equity 1,300 760 510 110 50 $ 1,300 $ 870 $ 560 600 600 260 $ 1,900 $ 1,470 $ 820 Common Shares Retained Earnings 2,300 790 960 960 430 370 Total Shareholders' Equity $ 3,090 $ 1,390 $ 1,330 Total Liabilities and Shareholders' Equity $ 4,990 $ 2,860 2,150 On January 1, 2022, 300 additional shares of common stock were sold (share numbers in thousands). The following are condensed financial statements of The Windy West Company for the three years ended December 31, 2020, 2021, 2022. The Windy West Company expanded their business in 2021-2022. The Windy West Company Comparative Balance Sheets December 31 (thousands of $) 2022 Current Assets Cash 2021 2020 $ 450 $ 50 $ 200 Accounts Receivable $ 590 $ 480 $ 240 Less: Allowance for Doubtful Accounts 50 540 20 460 240 Inventory Prepaid Expenses 750 130 Total Current Assets Capital Assets Less: Accumulated Depreciation 500 100 $ 1,870 $ 1,060 $ 1,040 4,050 2,340 1,380 930 3,120 540 1,800 270 1,110 $ 4,990 $ 2,860 $ 2,150 520 30 Total Assets Current Liabilities Accounts Payable Accrued Liabilities Total Current Liabilities Bonds Payable Total Liabilities Shareholders' Equity 1,300 760 510 110 50 $ 1,300 $ 870 $ 560 600 600 260 $ 1,900 $ 1,470 $ 820 Common Shares Retained Earnings 2,300 790 960 960 430 370 Total Shareholders' Equity $ 3,090 $ 1,390 $ 1,330 Total Liabilities and Shareholders' Equity $ 4,990 $ 2,860 2,150 On January 1, 2022, 300 additional shares of common stock were sold (share numbers in thousands).