Arun Company has had poor operating results for the past two years. As the

Arun Company has had poor operating results for the past two years. As

the accountant for Arun Company you have the following information available

to you:

2010 2009

Current assets $ 22500 $ 17500

Total assets 72500 55000

Current liabilities 10000 5000

Long-term liabilities 10000 %u2014

Owner%u2019s equity 52500 50000

Net sales 131000 100000

Net income 8000 5500

Total assets and owner%u2019s equity at the beginning of 2009 were $45000 and

$40000 respectively. The owner made no investments in 2009 or 2010.

Required

1. Compute the following measures of liquidity for 2009 and 2010: (a) working

capital and (b) current ratio. Comment on the differences between the years.

2. Compute the following measures of profitability for 2009 and 2010:

(a) profit margin (b) asset turnover (c) return on assets (d) debt to equity

ratio and (e) return on equity. Comment on the change in performance

from 2009 to 2010.