Part A – Chapter 21 in your textbook contains examples that will be helpful for completing the exercises below.
1. Using Excel formulas, prepare a vertical analysis for 2017 for the balance sheet below (only use 2017).
2. Using Excel formulas, prepare a horizontal analysis for the balance sheet below (use 2016 & 2017 – also note the order of the columns below).
3. Compute the following ratios and show the answer to two digits past the decimal: (i) the current ratio, (ii) the acid-test ratio. Use Excel formulas in the cells indicated below in yellow for calculating your ratios. Formulas for this exercise are located on page 779 in your textbook or on the Table 21-1 tab in this Excel file.
Current ratio:
Acid-test ratio:
4. Using Table 21-1, how would you interpret the current ratio result you computed above?
5. Using Table 21-1, how would you interpret the acid-test ratio result you computed above?
Green’s Landscaping
Balance Sheet
December 31, 2016 and 2017
2017 2016
Assets
Current Assets
Cash $5,275 $4,507
Accounts receivable 7,305 5,118
Merchandise inventory 45,522 48,722
Total current assets 58,102 58,347
Plant and equipment
Equipment 20,173 25,942
Total assets 78,275 84,289
Liabilities
Current liabilities
Accounts payable 3,809 4,476
Wages payable 2,432 1,973
Total current liabilities 6,241 6,449
Long-term liabilities
Mortgage note payable 36,454 45,899
Total liabilities 42,695 52,348
Owner’s Equity
A. Green, capital 35,580 31,941
Total liabilities and owner’s equity 78,275 84,289
