Arun company has had poor operating results for the past

Reference no: EM13579080

Arun Company has had poor operating results for the past two years. As the accountant for Arun Company, you have the following information available to you:

2010 2009
Current assets $ 22,500 $ 17,500
Total assets 72,500 55,000
Current liabilities 10,000 5,000
Long-term liabilities 10,000 %u2014
Owner%u2019s equity 52,500 50,000
Net sales 131,000 100,000
Net income 8,000 5,500

Total assets and owner%u2019s equity at the beginning of 2009 were $45,000 and $40,000, respectively. The owner made no investments in 2009 or 2010.

Required:

1. Compute the following measures of liquidity for 2009 and 2010: (a) working capital and (b) current ratio. Comment on the differences between the years.

2. Compute the following measures of profitability for 2009 and 2010:(a) profit margin, (b) asset turnover, (c) return on assets, (d) debt to equity ratio, and (e) return on equity. Comment on the change in performance from 2009 to 2010.

Reference no: EM13579080

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