Measuring and Evaluating Profitability and Liquidity
A recent balance sheet of Denver Tours is provided below:
DENVER TOURS BALANCE SHEET DECEMBER 31,2011 | ||
Assets | ||
Cash |
| $75,100 |
Accounts receivable |
| 14,000 |
Office supplies |
| 1,500 |
Prepaid rent |
| 3,400 |
Buses | $ 240,000 |
|
Accumulated depreciation: buses | (18,000) | $222,000 |
Total assets |
| $316,000 |
Accounts payable |
| $140,200 |
Unearned revenue |
| 94,800 |
Total liabilities |
| $235,000 |
|
| |
Capital stock |
| $ 80,000 |
Retained earnings |
| 1,000 |
Total stockholders' equity |
| $ 81,000 |
Total liabilities and stockholders' equity |
| $316,000 |
Other information provided by the company is as follows:
Total revenue for the year ended December 31,2011 | $152,000 |
Total expenses for the year ended December 31,2011 | 148,960 |
Total stockholders' equity, January 1,2011 | 79,000 |
Compute and discuss briefly the significance of the following measures as they relate to Denver Tours:
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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