Answer all of the following questions/problems and submit them to your mentor in a Word document.
You should use a financial calculator and Excel to solve the problems.
Remember: You must export your table(s) from Excel to Word before submitting your work.
- Discuss the importance of financial statements and how they are used by businesses.
- What is the basic format of the income statement and what is the relevance of the basic categories?
- Cash flows for an organization come from operating activities and investment activities. Discuss the importance of each to the organization.
- The Happy Auto Shop has the following annual information:
Gross Sales | $700,000 |
Net sales | $696,000 |
Gross profit | $448,000 |
What are the shop’s returns and allowances and cost of goods sold?
- Construct a statement of financial position (balance sheet) for the Humperdink family using the following information:
cash | $50 |
Checking account | $2,500 |
student loan balance | $6,000 |
stocks and bonds | $2,600 |
savings account | $5,850 |
residence | $110,000 |
automobile | $12,000 |
savings account | $5,800 |
automobile loan balance | $12,000 |
401K retirement account | $15,000 |
furniture, clothing, jewelry | $8,000 |
credit card balance | $4,000 |
mortgage loan balance | $99,000 |
- What is the purpose of financial statement analysis? How do the three types of financial statement analysis differ from each other and when is each used?
- Samantha Knight is applying for a small-business loan. She provides the bank with the following information:
cash in checking accounts | $5,000 |
cash in savings | $10,350 |
home market value | $145,500 |
first mortgage on house | $25,000 |
home equity loan limit | $70,000 |
home equity loan | $10,000 |
automobile market value | $19,000 |
automobile loan outstanding | $15,000 |
credit card debt | $1,500 |
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- Calculate the debt-to-asset ratio.
- Calculate the debt-to-equity ratio.
- What percentage of Samantha’s assets is owned by others?
- Given the profit loss (income statement) and balance sheet for Sam’s Sandwich Delivery (Table 4-8, page 121 of your textbook), answer the following:
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- Calculate the following ratios: current, quick, accounts receivable turnover, fixed asset turnover.
- Using the inventory figure on the balance sheet as average inventory, calculate the inventory turnover ratio.
- Calculate the debt-to-equity ratio, debt-to-total asset ratio, and operating profit margin ratio.
- Perform a vertical analysis of the income statement.
- Perform a vertical analysis of the balance sheet.
- Based on your analysis, would you consider investing in Sam’s Sandwich Delivery?