Textbook Problem

A Preparation of Ratios

Refer to the financial statements for Burch Industries in Problem 12-89A and the following data.

Required:

1. Prepare all the financial ratios for Burch for 2019 and 2018 (using percentage terms where appropriate and rounding all answers to two decimal places).

2. CONCEPTUAL CONNECTION Explain whether Burch’s short-term liquidity is adequate.

3. CONCEPTUAL CONNECTION Discuss whether Burch uses its assets efficiently.

4. CONCEPTUAL CONNECTION Determine whether Burch is profitable.

5. CONCEPTUAL CONNECTION Discuss whether long-term creditors should regard Burch as a high-risk or a low-risk firm.

6. Perform a Dupont analysis (rounding to two decimal places) for 2018 and 2019.