Reference no: EM131621545

Read the scenario below and answer the following 3 questions (be sure to scroll down). You will also need to complete the Budget on the "Income Statement & Budget" tab. Scenario: South Shore Medical Clinic is expanding its operations. As you will notice from Year 3 to Year 4, they have increased their revenue and encounted additional expenses. In addition, they have rented a new office at the end of the year so their rent expense is going to increase (they will now have two offices). In addition, they have added 2 additional staff members to payroll. Using the Income Statement, prepare a budget that takes these changes into account for the upcoming year.

Questions:

1. Using the Balance Sheet, calculate the current ratio. Comment on whether or not the ratio shows financial strength.

2. Using the Income Statement, calculate the operating margin ratio for Year 4. How well does the company measure in terms of operating efficiency?

3. Explain your budget suggestions. Do you think Revenue will increase or decrease? Do you think Expenses will increase or decrease?

Task #1: South Shore Medical Clinic is expanding its operations. As you will notice from Year 3 to Year 4, they have increased their revenue and encounted additional expenses. In addition, they have rented a new office at the end of the year so their rent expense is going to increase (they will now have two offices). In addition, they have added 2 additional staff members to payroll. Using the Income Statement below, prepare a budget that takes these changes into account for the upcoming year. Suggest the budget amounts for Year 5 in the column below.

South Shore Medical Clinic
Income Statement
For the year ending December 31, 20X4

				ACTUAL	BUDGET
Revenues:
Service Fee Revenue				$  160,000
Total Revenues
Expenses:
Advertising Expense				$    20,000
Shipping Expense				$    12,000
Salaries Expense				$    80,000
Rent Expense				$    32,000
Utilities Expense				$      5,200
Total Expenses
Income:
Net Income				$    10,800