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Liquidity and Profitability Ratios
Business Application- Villegas Company is considering applying for a bank loan. Various data from Villegas's classified financial statements follow.
2014
2013
Current assets
$100,000
$ 85,000
Total assets
440,000
355,000
Current liabilities
45,000
25,000
Long-term liabilities
75,000
Owner's equity
320,000
305,000
Sales
600,000
525,000
Net income
30,000
40,000
Its total assets and owner's equity at the beginning of 2013 were $345,000 and $295,000, respectively.
1. Use (a) liquidity analysis and (b) profitability analysis to document Villegas's financial position. (Round to two decimal places.)
2. Discuss Villegas's profitability and liquidity. Do you think it will qualify for a bank loan?
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