Rollins Products Company has had poor operating results for the past two years. As the accountant for Rollins Products Company, you have the following information available to you:
- Current assets $45,000 $35,000
- Total assets 145,000 110,000
- Current liabilities 20,000 10,000
- Long-term liabilities 20,000 --
- Owner's equity 105,000 100,000
- Net sales 262,000 200,000
- Net income 16,000 11,000
Total assets and owner's equity at beginning of 2010 were $90,000 and $80,000, respectively. The owner made no investments 2010 or 2011.
1. Compute the following measures of liquidity for 2010 and 2011: (a) working capital and (b) current ratio. Comment on the differences between the years.
2. Computer the following measures of profitability for 2009 and 2010: (a) profit margin, (b) asset turnover, (c) return on assets,(d)debt to equity ratio, and (e) return on equity. Comment on the change in performance from 2010 to 2011