Income Statements and Balance Sheet Ratios

Income Statement 2008 & 2007

1/1/2008-12/31/2008

Revenue $3,249,580.53

Direct Expenses

Salaries & Wages $487,437.08

Vehicle Maintenance $64,991.61

Fuel $20,449.80

Traps & Chemicals $1,378,203.63

$1,951,082.12

Indirect Expenses

Rent $39,338.17

Licenses $2,480.00

Insurance $103,613.43

Administrative Salaries $150,250.00

Commissions $16,991.61

Payroll Taxes $72,014.66

Legal Expenses $12,000.00

Accounting Fees $7,000.00

Office Supplies $7,800.00

Utilities $10,806.40

Advertising Expenses $116,000.00

Bad Debts $122,138.64

Depreciation Expense $94,925.75

Misc. Expense $50,000.00

$805,358.66

Total Expenses $2,756,440.78

Net Income $493,139.75

1/1/2007-12/31/2007

Revenue $3,893,027.78

Direct Expenses

Salaries& Wages $583,954.17

Traps & Chemicals $1,651,100.81

Fuel $19,177.32

Vehicle Maintenance $77,860.56

$2,332,092.85

Indirect Expenses

Rent $38,192.40

Licenses $2,480.00

Interest Expense $0.00

Insurance $103,613.43

Admin. Salaries $133,500.00

Commissions $52,860.49

Payroll Taxes $84,734.61

Legal Expenses $12,000.00

Accounting Fees $7,000.00

Office Supplies $7,800.00

Utilities $9,824.00

Advertising Expenses $81,510.00

Bad Debts $103,493.45

Depreciation Expense $94,925.75

Misc. Expenses $60,000.00

$791,934.13

$3,124,026.98

Net Income $769,000.80

Balance Sheet 2008 & 2007

12/31/2008

Current Assets

Cash $818,440.68

Accounts Receivable $812,395.13

Inventory $205,934.30

Total Current Assets $1,836,770.12

Fixed Assets

Vehicles $268,750.00

Tools $110,953.00

Less Accumulated Depreciation ($284,431.95)

Total Fixed Assets $95,271.05

Total Assets $1,932,041.17

Liabilities

Current Liabilities

Accrued Payroll Taxes $36,007.33

Accounts Payable $270,798.38

Total Current Liabilities $306,805.71

Long-Term Liabilities $0.00

Total Liabilities $306,805.71

Stockholders’ Equity

Common Stock (1,000,000 authorized shares at $1 par) $70,000.00

Retained Earnings $1,062,095.71

Net Income $493,139.75

Total Stockholders’ Equity $1,625,235.46

Total Liabilities & Stockholders’ Equity $1,932,041.17

12/31/2007

Current Assets

Cash $291,703.44

Accounts Receivable $811,047.45

Inventory $205,934.30

Total Current Assets $1,308,685.20

Fixed Assets

Vehicles $268,750.00

Tools $110,953.00

Less Accumulated Depreciation ($189,506.20)

Total Fixed Assets $190,196.80

Total Assets $1,498,882.00

Liabilities

Current Liabilities

Accrued Payroll Taxes $42,367.31

Accounts Payable $324,418.98

Total Current Liabilities $366,786.29

Long‐Term Liabilities

Auto Loans $0.00

Total Long‐Term Liabilities $0.00

Total Liabilities $366,786.29

Stockholders’ Equity

Common Stock (1,000,000 authorized shares at $1 par) $70,000.00

Retained Earnings $293,094.91

Net Income $769,000.80

Total Stockholders’ Equity $1,132,095.71

Total Liabilities & Stockholders’ Equity $1,498,882.00

Instructions:

Using the 2007 & 2008 Income Statement and Balance Sheet provided, calculate the following…

Liquidity ratios

· Current ratio

· Acid-test, or quick, ratio

· Receivables turnover

· Inventory turnover

Profitability ratios

· Asset turnover

· Profit margin

· Return on assets

· Return on common stockholders’ equity

Solvency ratios

· Debt to total assets

· Times interest earned

Please be sure to also do the following…

1. Show your calculations for each ratio

2. Create a horizontal and vertical analysis for the balance sheet and the income statement

3. Write a 350- to 700-word memo to the CEO of your selected organization (Berry’s Bug Busters) in which you discuss your findings from your ratio calculations and your horizontal and vertical analysis. In your memo, address the following questions:

a) What do the liquidity, profitability, and solvency ratios reveal about the financial position of the company?

b) Which users may be interested in each type of ratio?

c) What does the collected data reveal about eh performance and position of the company