Problem

Measuring and Evaluating Profitability and LiquidityA recent balance sheet of Oregon Foods...

Measuring and Evaluating Profitability and Liquidity

A recent balance sheet of Oregon Foods is provided below:

OREGON FOODS

BALANCE SHEET

DECEMBER 31, 2011

Assets

Cash

 

$ 6,800

Accounts receivable

 

7,200

Office supplies

 

300

Prepaid rent

 

1,7.00

Equipment

$12,000

 

Accumulated depreciation: equipment

(4,800)

$ 7,200

Total assets

 

$23.200

Liabilities

Accounts payable

 

$ 2,200

Income taxes payable

 

1,800

Total liabilities

 

$ 4,000

Stockholders' Equity

Capital stock

 

$10,000

Retained earnings

 

9.200

Total stockholders' equity

 

$19.200

Total liabilities and stockholders' equity

 

$23,200

Other information provided by the company is as follows:

Total revenue for the year ended December 31,2011

$25,500

Total expenses for the year ended December 31,2011

20,400

Total'stockholders' equity, January 1,2011

14,800

Compute and discuss briefly the significance of the following measures as they relate to Oregon Foods:

a.       Net income percentage in 2011.


b.       Return on equity in 2011.


c.        Working capital on December 31,2011.


d.       Current ratio on December 31,2011.

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