Assignment Example | Topics and Well Written Essays - 750 words - 35

Assignment Example At year end he had 2,000 olives left in inventory. Since it appears the prices are rising very fast, perhaps due to inflation, FIFO method would appear more realistic in the eyes of the bank, unlike LIFO, which would result into unrealistically lower cost of goods sold and higher net income. Therefore, Mr. Jones should use FIFO method (Albrecht 45). Please solve the following Financial Statement Ratios using the Balance Sheet and Income Statement found below. Also tell me, in a sentence or two, what we have learned from each one. Don’t give me a definition of the ratio - tell me what these numbers tell us. A current ratio of 2.3 is a healthy liquidity level, since it means that the company is able to meet its short-term dues using its current assets/liquid assets. For that reason, the company cannot fall bankrupt easily (Baker, Benrud and Powell 112). This figure shows that the financial position of the company is fine. Having a positive working capital means that the company has enough liquid resources to pay its short-term liabilities when they fall due hence it cannot be declared bankrupt