Accounting and Finance Foundations

Unit 11

Accounting and Finance Foundations Unit 11: Financial Analysis 829

Financial Analysis

Chapter 23

23.3.1

Student Assignment

Analyzing Income Statements and Balance Sheets

1. The summaries of two income statements follow. Express each item on the two statements as a
   percentage of net sales.

Income Statement A Income Statement B

Major Items Amount Percent Major Items Amount Percent

Net Sales $300,000 a. Net Sales $64,000 f.

Cost of Goods Sold 180,000 b. Cost of Goods Sold 28,800 g.

Gross Profit on Sales 120,000 c. Gross Profit on Sales 35,200 h.

Operating Expenses 90,000 d. Operating Expenses 30,080 i.

Net Income 30,000 e. Net Income 5,120 j.

2. During the month of June, a coffee shop had net sales of $27,000. The gross profit was $12,150, and
   the operating expenses were $10,800. What was the profit margin as a percent of net sales? What was
   the net income for June?


3. If a store has $219,110 in current liabilities and $338,920 in current assets, what would the current
   ratio be?


4. The balance sheet of the Maggie Ribbon Company shows $567,320 in current liabilities and $798,538
   in current assets. What is the current ratio?


5. Find the current ratio based on the following: Cash, $4,180; Accounts Receivable, $3,820; Merchan-
   dise Inventory, $158,110; Store Supplies, $7,170; Store Equipment, $21,100; and Delivery Equipment,
   $45,700. It has the following liabilities: Accounts Payable, $74,160; and a Notes Payable of $7,600.