Liquidity and Profitability Ratios
Business Application- Villegas Company is considering applying for a bank loan. Various data from Villegas's classified financial statements follow.
|
|
2014
|
2013
|
|
Current assets
|
$100,000
|
$ 85,000
|
|
Total assets
|
440,000
|
355,000
|
|
Current liabilities
|
45,000
|
25,000
|
|
Long-term liabilities
|
75,000
|
25,000
|
|
Owner's equity
|
320,000
|
305,000
|
|
Sales
|
600,000
|
525,000
|
|
Net income
|
30,000
|
40,000
|
Its total assets and owner's equity at the beginning of 2013 were $345,000 and $295,000, respectively.
1. Use (a) liquidity analysis and (b) profitability analysis to document Villegas's financial position. (Round to two decimal places.)
2. Discuss Villegas's profitability and liquidity. Do you think it will qualify for a bank loan?