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For this weeks assignment you are tasked with performing a financial ratio analysis of a...

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Accounting

For this weeks assignment you are tasked with performing a financial ratio analysis of a small bakery.

Based on the financial statement below, calculate the following for 2018 and 2019:

  • Profit Margin
  • Return on owners capital
  • Current Ratio
  • Quick Ratio
  • Inventory Turnover

The following information relates to the business of Colossus Bakery, and the owner is concerned about the profitability and financial structure of her business as of 12/31/2019, especially since the bank requires repayment of the businesss overdraft of $25,375.

12/31/2019

12/31/2018

Revenue (sales on credit)

$120,000

$95,000

Cost of Sales

$65,000

$47,500

Other Expenses

$29,500

$20,800

Cash and Cash Equivalents

$(25,375)

$19,500

Inventories

$45,000

$36,500

Accounts Receivable (net)

$85,000

$29,000

Non-current assets (net)

$79,000

$35,600

Accounts Payable

$13,600

$15,450

Owner Capital

$95,000

$108,000

Non-current liabilities

$32,000

-

Once youve completed your calculations for both years what we can say about: profitability, liquidity, and financial stability of the bakery. Include recommendations to improve areas of concern.

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