Accounting Review Problem 8
Analyzing Liquidity and Profitability
Flavin Shirt Company has faced increased competition from imported shirts in recent years. Presented below is the summary information for the last two years:
| 20x2 | 20x3 | |
|---|---|---|
| Current Assets | $200,000 | $170,000 |
| Total Assets | 880,000 | 710,000 |
| Current Liabilities | 90,000 | 50,000 |
| Long-Term Liabilities | 150,000 | 50,000 |
| Owner's Equity | 640,000 | 610,000 |
| Sales | 1,200,000 | 1,050,000 |
| Net Income | 60,000 | 80,000 |
Total assets and owner’s equity at the beginning of 20x2 were $690,000 and $590,000, respectively.
RMonday, July 30, 2007 1:53 PMuidity analysis and (2) profitability analysis to document the declining financial position of Flavin Shirt Company.