The Hair Pro Inc.

Income Statement
For the Quarter Ended March 31, 2023

Service Revenue $14,400.00

Less: Supplies Expense ($5,800.00)
Less: Salaries and Wages ($3,200.00)
Less: Utilities Expense ($700.00)
Less: Rent Expense ($600.00)
Total Expenses $10,300.00

Net Income $4,100.00

The Hair Pro Inc.

Statement of Retained Earnings
For the Quarter Ended March 31, 2023

Retained Earnings, Jan. 1, 2023 $-

Add: Net Income $4,100.00

Retained Earnings, March 31, 2023 $4,100.00

 The Hair Pro Inc.
Balance Sheet
At March 31, 2023

Assets:
Current
Cash $18,000.00
Prepaid Insurance $600.00
Prepaid Rent $7,300.00
Total Current Assets $25,900.00

Non-current
Shop Equipment $9,700.00
Shop Furniture and Fixtures $9,700.00
Total Non-current Assets $19,400.00

Total Assets $45,300.00

Liabilities and Stockholder’s Equity:

Liabilities
Current
Accounts Payable $10,800.00
Deferred Revenue $400.00
Total Current Liabilities $11,200.00
Non-current
Notes Payable (Long-term) $20,000.00
Total Non-current Liabilities $20,000.00

Total Liabilities $31,200.00

Stockholder’s Equity
Common Stock $10,000.00
Retained Earnings, March 31, 2023 $4,100.00
Total Equity $14,100.00

Total Liabilities and Equity $45,300.00

Evaluation:
a. The business is profitable, as evidenced by the positive net income of $4,100.00 for the quarter.

b. The company can pay its current obligations and liabilities. To determine the current ratio, we divide
current assets by current liabilities.

Current Ratio = Current Assets / Current Liabilities

Current Ratio = $25,900 / $11,200
Current Ratio = 2.31

A current ratio above 1 indicates that the company has sufficient current assets to cover its current
liabilities. In this case, The Hair Pro, Inc. has a current ratio of 2.31, indicating that it can meet its current
obligations.

c. To evaluate the financing of utility assets, we can calculate the debt-to-equity ratio.

Debt-to-Equity Ratio = Total Liabilities / Total Equity

Debt-to-Equity Ratio = $31,200.00 / $14,100.00
Debt-to-Equity Ratio = 2.21
With a debt-to-equity ratio of 2.21, it suggests that a higher proportion of The Hair Pro, Inc.'s utility
assets are financed by debts rather than equity.

Overall, The Hair Pro, Inc. had a profitable quarter, demonstrating positive financial performance. The
company's current ratio indicates its ability to meet short-term obligations, and the debt-to-equity ratio
highlights its reliance on debt financing for utility assets. It is important for the company to monitor its
debt levels and ensure sustainable financial management practices for long-term success.