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For this assignment you are tasked with performing a financial ratio analysis of a small bakery.
Based on the financial statement below, calculate the following for 2018 and 2019:
- Profit Margin
- Return on owner’s capital
- Current Ratio
- Quick Ratio
- Inventory Turnover
The following information relates to the business of Colossus Bakery, and the owner is concerned about the profitability and financial structure of her business as of 12/31/2019, especially since the bank requires repayment of the business’s overdraft of $25,375.
| 12/31/2019 | 12/31/2018 | |
| Revenue (sales on credit) | $120,000 | $95,000 |
| Cost of Sales | $65,000 | $47,500 |
| Other Expenses | $29,500 | $20,800 |
| Cash and Cash Equivalents | $(25,375) | $19,500 |
| Inventories | $45,000 | $36,500 |
| Accounts Receivable (net) | $85,000 | $29,000 |
| Non-current assets (net) | $79,000 | $35,600 |
| Accounts Payable | $13,600 | $15,450 |
| Owner Capital | $95,000 | $108,000 |
| Non-current liabilities | $32,000 | – |
Once you’ve completed your calculations for both years, write a report to the owner highlighting strengths and areas of concern in relation to profitability, liquidity, and financial stability of the bakery. Include recommendations to improve areas of concern.
Your report must adhere to APA guidelines. Provide an explanation to the owner of each ratio you calculated and the meaning of it. Your recommendations should be part of your closing paragraph.
Include a cover page and a separate reference page listing your sources.
