Chapter 12
Using Accounting Information
380
Review Exercise 1
Use the financial statements for Basil’s Bakery to perform a horizontal and vertical analysis and
calculate the following financial ratios and figures for 2016.
• Working capital
• Current ratio
• Quick ratio
• Gross profit margin
• Net profit margin
• Return on equity
• Inventory turnover ratio
• Inventory days on hand
• Debt-to-equity ratio
After calculating the ratios, comment on the result for each ratio. In your explanation, ensure you
state whether or not the result is good along with the possible reasoning behind that determination.
Basil's Bakery
Balance Sheet
As at December 31, 2016 and 2015
2016
2015
ASSETS
Current Assets
Cash
$1,605
$987
Accounts receivable
1,175
573
Inventory
396
256
Other current assets
301
103
Total Current Assets
3,477
1,919
Property, plant & equipment
2,034
1,170
TOTAL ASSETS
$5,511
$3,089
LIABILITIES AND EQUITY
Liabilities
Current liabilities
$1,474
$547
Non-current liabilities
104
58
TOTAL LIABILITIES
1,578
605
Shareholders’ Equity
3,933
2,484
TOTAL LIABILITIES AND EQUITY
$5,511
$3,089
*Note: the numbers in this financial statement is expressed in thousands of Canadian dollars.
