Ratio Analysis Memo
Access the information contained in your selected organization’s balance sheet and income statement to calculate the following:
Liquidity ratios
Current ratio
Acid-test, or quick, ratio
Receivables turnover
Inventory turnover
Profitability ratios
Asset turnover
Profit margin
Return on assets
Return on common stockholders’ equity
Solvency ratios
Debt to total assets
Times interest earned
Show your calculations for each ratio.
Create a horizontal and vertical analysis for the balance sheet and the income statement.
Write a 350- to 700-word memo to the CEO of your selected organization in which you discuss your findings from your ratio calculations and your horizontal and vertical analysis. In your memo, address the following questions:
What do the liquidity, profitability, and solvency ratios reveal about the financial position of the company?
Which users may be interested in each type of ratio?
What does the collected data reveal about the performance and position of the company?
Format your memo consistent with APA guidelines.
Current Assets:
Cash $1,430,000
Accounts Receivable $86,000
Less: Reserve for Bad Debts $0
$86,000 $86,000
Merchandise Inventory $429,000
Prepaid Expenses $26,000
Notes Receivable $0
Total Current Assets $1,971,000 $1,971,000
Fixed Assets:
Vehicles $63,000
Less: Accumulated Depreciation $27,750
$35,250 $35,250
Furniture and Fixtures $435,000
Less: Accumulated Depreciation $186,000
$249,000 $249,000
Equipment $634,000
Less Accumulated Depreciation $214,000
$420,000 $420,000
Total Fixed Assets $704,250 $704,250
Other Assets:
Goodwill $0
Total Other Assets $0 $0
Total Assets $2,675,250
Kudler Fine Foods
Balance Sheet
December 31, 2003
Assets
Current Liabilities:
Accounts Payable $96,500
Sales Tax Payable $3,950
Payroll Taxes Payable $15,840
Accrued Wages Payable $0
Unearned Revenues $0
Short-Term Notes Payable $0
Short-Term Bank Loan Payable $0
Total Current Liabilities
Liquidity ratios
Current ratio
Acid-test, or quick, ratio
Receivables turnover
Inventory turnover
Profitability ratios
Asset turnover
Profit margin
Return on assets
Return on common stockholders’ equity
Solvency ratios
Debt to total assets
Times interest earned
Show your calculations for each ratio.
Create a horizontal and vertical analysis for the balance sheet and the income statement.
Write a 350- to 700-word memo to the CEO of your selected organization in which you discuss your findings from your ratio calculations and your horizontal and vertical analysis. In your memo, address the following questions:
What do the liquidity, profitability, and solvency ratios reveal about the financial position of the company?
Which users may be interested in each type of ratio?
What does the collected data reveal about the performance and position of the company?
Format your memo consistent with APA guidelines.
Current Assets:
Cash $1,430,000
Accounts Receivable $86,000
Less: Reserve for Bad Debts $0
$86,000 $86,000
Merchandise Inventory $429,000
Prepaid Expenses $26,000
Notes Receivable $0
Total Current Assets $1,971,000 $1,971,000
Fixed Assets:
Vehicles $63,000
Less: Accumulated Depreciation $27,750
$35,250 $35,250
Furniture and Fixtures $435,000
Less: Accumulated Depreciation $186,000
$249,000 $249,000
Equipment $634,000
Less Accumulated Depreciation $214,000
$420,000 $420,000
Total Fixed Assets $704,250 $704,250
Other Assets:
Goodwill $0
Total Other Assets $0 $0
Total Assets $2,675,250
Kudler Fine Foods
Balance Sheet
December 31, 2003
Assets
Current Liabilities:
Accounts Payable $96,500
Sales Tax Payable $3,950
Payroll Taxes Payable $15,840
Accrued Wages Payable $0
Unearned Revenues $0
Short-Term Notes Payable $0
Short-Term Bank Loan Payable $0
Total Current Liabilities