Betty’s Bakery

Small Business Manual Accounting & Bookkeeping Practice Set

Financial Ratio Analysis - continued

Work to be Performed

The Financial Ratio Analysis Worksheet is located in Step 5 Workpapers (5 8). Remove it from the manual in order to work on it. Review and become familiar with the format and information to be entered. The worksheet includes the following seven ratios:

• Two Liquidity ratios: Working Capital and Current Ratio

• One Efficient ratio: Days’ Sales Outstanding (DSO)

• Two Profitability ratios: Net Income as a Percentage of Sales & Return on Investment

• Two Leverage ratios: Owner’s Claims to Assets and Creditor’s Claims to Assets.

1. Enter the month end date and year right below FINANCIAL RATIO ANALYSIS

2. Using both the Balance Sheet and Income Statement, calculate the seven financial ratios. Note: explanations for calculating the ratios are described in each section.

3. Evaluate each ratio by entering a checkmark at the right to indicate Positive, Neutral, or Negative. Remember, ratio analysis is subject to personal opinion; and since this is the company’s first month in business, the ratios are not as meaningful as they will be as the organization develops additional operational history.

Step 6: Solutions

Solutions for the Six Journals, Trial Balance, Bank Reconciliation, Balance Sheet, Income Statement, Financial Ratios, and General Ledger are included in Sections 6, 7, and 8

Betty's Bakery

Sales Invoice

Betty's Bakery

Betty's Bakery

Sales Invoice

Betty's Bakery

Sales Invoice

Betty's Bakery

125 Maple Glen Ave Pleasantville, CA 93121 Tel: (619) 555-0000 Fax: (619) 555-1111