Assignment 1: Discussion Question
Discuss the importance of quality in a firm's financial statements and how you would go about evaluating the quality of a firm’s financial statement. What do you consider to be the four main pro forma financial statements to financial forecasting, and why?
By
 
Friday, November 8, 2013
, respond to the following discussion question. Submit your response to the appropriate
 
Discussion Area
.
 
Assignment 2: Ratio Analysis
By 
Saturday, November 9, 2013
 solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, 
provide an analysis
 of how those results can be used by the business to improve its performance. 
Balance Sheet as of December 31, 2010
Gary and Company
Cash  
$45
 
Accounts payables  
$45
Receivables    
66
 
Notes payables 
45
Inventory
159
 
Other current liabilities 
21
Marketable securities
33
 
Total current liabilities
$111
Total current assets 
$303
 
 
 
Net fixed assets  
147
 
Long Term Liabilities
 
Total Assets  
$450
 
Long-term debt  
24
 
 
Total Liabilities 
$135
 
 
 
 
 
 
Owners Equity
 
 
 
Common stock
$114
 
 
Retained earnings
201
 
 
Total stockholders’ equity
315
 
 
 
Total liabilities and equity
$450
 
Income Statement Year 2010
 
 
Net sales
$795
Cost of goods sold 
660
Gross profit  
135
Selling expenses  
73.5
Depreciation
12
EBIT
49.5
Interest expense  
4.5
EBT
45
Taxes (40%)  
18
Net income
27
 
1. Calculate the following ratios AND interpret the result against the industry average
:
Ratio
Your Answer
Industry Average
Your Interpretation

(Good-Fair-Low-Poor)
Profit margin on sales
 
3%
 
Return on assets
 
9%
 
Receivable turnover
 
1.6X
 
Inventory turnover
 
10X
 
Fixed asset turnover
 
2X
 
Total asset turnover
 
3X
 
Current ratio
 
2X
 
Quick ratio
 
1.5X
 
Times interest earned
 
7X
 
 
2. Analysis:
Give your interpretation of what the ratios calculations show and how the business can use this information to improve its performance. Justify all answers.