Compute the current ratio for year 1 year 2 and year 3 for

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Reference no: EM13575948

Compute the current ratio for Year 1, Year 2, and Year 3 for Company A.

1) Preparing a Common-Size Income Statement

Company A reported the following income statement data for the most recent three years:

 

Year 3

Year 2

Year 1

Sales                                                   

$120,000

$90,000

$100,000

Cost of goods sold                                        

(55,000)

(47,000)

(48,000)

Operating expenses:

 

 

 

Marketing expense                                       

(7,000)

(7,000)

(6,000)

R&D expense                                          

(15,000)

(4,000)

(10,000)

Administrative expense                                   

(20,000)

(22,000)

(20,000)

Operating income                                         

 $ 23,000

 $10,000

 $ 16,000

Interest expense                                          

(3,000)

(5,000)

(3,000)

Income before income taxes                                 

 $ 20,000

 $ 5,000

 $ 13,000

Income tax expense                                       

(8,000)

(2,000)

(5,000)

Net income                                        

 $ 12,000

 $ 3,000

 $ 8,000

Prepare a common-size income statement for each year.

2) Preparing a Common-Size Balance Sheet

Company A reported the following balance sheet data for the most recent three years:

 

Year 3

Year 2

Year 1

Cash                                                 

$ 2,000

$ 2,000

$ 1,000

Accounts receivable                                       

5,000

11,000

5,000

Inventory                                              

10,000

16,000

10,000

Current assets                                          

 $17,000

 $29,000

 $16,000

Property, plant, and equipment (net)                           

50,000

45,000

40,000

Total assets                                           

 $67,000

 $74,000

 $56,000

Accounts payable                                        

$ 9,000

$14,000

$ 7,000

Short-term debt                                         

5,000

9,000

5,000

Current liabilities                                         

 $14,000

 $23,000

 $12,000

Long-term debt                                          

20,000

25,000

20,000

Total liabilities                                         

 $34,000

 $48,000

 $32,000

Paid-in capital                                           

5,000

5,000

5,000

Retained earnings                                        

28,000

21,000

19,000

Total liabilities and equities                                

 $67,000

 $74,000

 $56,000

Prepare the Asset section of a common-size balance sheet for each year.

Reference no: EM13575948

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