Accounting 301 – Jackson
UNIVERSITY OF ILLINOIS
Amenhotep – Pharaoh of Egypt
Daniel J. Hejza
September 16, 2009
Analysis of Sihathor & Pemsah Lands
This memo provides an analysis of which noble did better with his lands, Sihathor or Pemsah and will notify you of a recent setback with Pemsah. To aid in this comparison, the statement of operations, or balance sheet, of each noble is attached.
My advice is that Pemsah did better with his lands than Sihathor. This is based on the first year’s operations. You must look beyond the net income of corn and into ratios which level the playing field, such as return on equity, profit margin, percent of expected harvest, growth in assets, return on assets, and a few secondary metrics. Pemsah outperformed Sihathor on every one of these metrics (please refer to attachments of last memo). Looking on the attached balance sheets, Sihathor has a larger percentage of total liabilities to total assets (7.00%) than Pemsah (6.52%). This is yet another indicator that Pemsah is more efficient and profitable in his farming endeavors than Sihathor because Pemsah was able to keep his debts the lowest.
Shortly after the harvest, mice infested Pemsah’s corn granary. The problem is currently being treated and total losses are not yet known. Some of the stored corn will be lost with certainty. This will have an effect on the statement of position because this loss represents an expense (or it even possibly could be considered an extraordinary loss) that is not represented on the statement of operations and thus changes the net income. This will lower both owner’s equity and assets (retained earnings and corn, respectively) on the balance sheet. It will also affect all of the performance measures, such as return on equity that were used to decide which noble was more efficient. Depending on the amount of this loss, it could...
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