With reference to the information in P4.2, use a common-size vertical analysis to determine the composition of current assets and current liabilities for Years 0006 and 0007. Discuss the results.


You are provided with the following information regarding current assets and current liabilities of a restaurant operation for two successive years.

Calculate the following for Years 0006 and 0007.

a. Working capital.

b. Current ratio

c. Quick ratio Sales revenue for Year 0007 is $544,800. The composition of sales revenue is cash 36%, credit card sales revenue 61.5%, and accounts receivable credit sales revenue of 2.5%. For Year 0007, calculate the following:

d. Credit card receivables as a percentage of credit card sales revenue

e. Credit card receivables turnover ratio

f. Credit card average collection period

g. Accounts receivable as a percentage of accounts receivable credit sales revenue

h. Accounts receivable turnover ratio

i. Accounts receivable average collection period

j. Cost of sales was $212,472; calculate cost of sales as a percentage of sales revenue

k. Comment on what these ratios tell you about the restaurant.

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