UNDERSTANDING FINANCIAL RATIOS IN A CASE STUDY FINANCIAL PLANS AND STATEMENTS ARE AN IMPORTANT PART OF IDENTIFYING HOW MUCH MONEY IS NEEDED, AND OF DETERMINING THE HEALTH OF THE COMPANY THROUGH COMPANY VALUATION. COMPLETING FINANCIAL STATEMENTS IS PART OF

Understanding Financial Ratios in a Case Study

Financial plans and statements are an important part of identifying how much money is needed, and of determining the health of the company through company valuation. Completing financial statements is part of the role of the entrepreneur in raising capital.

Reread “All Is Not Paradise in Eden’s Garden,” parts 1 and 2,( Attached below) in files found at the end of subsection LO 4 of this week’s chapter of your text.

Assume the role of Shelly Edison (the accountant) and calculate the following ratios. Using the financial statements for Eden’s Garden, calculate the following ratios:

  • Current Ratio
  • Quick Ratio
  • Debt Ratio
  • Times Interest Turnover Ratio
  • Average Inventory Turnover
  • Average Collection Period
    • Average collection period in days
  • Average Payable Period
    • Average payable period in days
  • Net Sales to Net Assets
  • Net Sales to Working Capital
  • Net Profit on Sales
  • Net Profit on Equity

What recommendations can you make to Eden’s to improve their company’s financial performance in the future?

Your paper should be 3-5 pages in length and conform to the APA Style with in text citationsCalculations of the ratios should be shown in an appendix (Xcel spreadsheets would work as well) in APA format while the body of the paper is used for explanations and recommendations.

 

 

Text Box: Joe and Kaitlin Eden, co-owners of Eden's Garden, a small nurs-   ery, lawn, and garden supply business, have just received their  Balance Sheet, Eden's Garden Assets  Current Assets  Cash  $6,457  Accounts Receivable $29,152   Less Allowance for $3,200 $25,952  Doubtful Accounts    Inventory  $88,157  Supplies  $7,514  Prepaid Expenses  $1,856  Total Current Assets  $129,936  Fixed Assets    Land  $59,150  Buildings $51,027   Less Accumulated Depreciation $2,061 $48,966  Autos $24,671   Less Accumulated $12,300 $12,371  Depreciation    Equipment $22,375   Less Accumulated Depreciation $1,250 $21,125  Furniture and Fixtures $10,295   Less Accumulated Depreciation $1,000 $9,295  Total Fixed Assets  $150,907  Intangibles (Goodwill)  $0  Total Assets  $280,843  Liabilities    Current Liabilities    Accounts Payable  $54,258  Notes Payable  $20,150  Credit Line Payable  $8,118  Accrued Wages/Salaries Payable  $1,344  Accrued Interest Payable  $1,785  Accrued Taxes Payable  $1,967  Total Current Liabilities  $87,622  Long-Term Liabilities    Mortgage  $72,846  Note Payable  $47,000  Total Long-Term Liabilities  $119,846  Owner's Equity    Sam Lloyd, Capital  $73,375  Total Liabilities and Owner's    Equity  $280,843Text Box: Income Statement, Eden's Garden Net Sales Revenue*  $689,247  Cost of Goods Sold    Beginning Inventory, 1/1/xx $78,271   + Purchases $403,569   Goods available for Sale $481,840   - Ending Inventory, 12,31/xx $86,157   Cost of Goods Sold  $395,683  Gross Profit  $293,564  Operating Expenses    Advertising $22,150   Insurance $9,187   Depreciation    Building $26,705   Autos $7,895   Equipment $11,200   Salaries $116,541   Uniforms $4,018   Repairs and Maintenance $9,097   Travel $2,658   Entertainment $2,798   Total Operating Expenses  $212,249  General Expenses    Utilities $7,987   Telephone $2,753   Professional Fees $3,000   Postage $1,892   Payroll Taxes $11,589   Total General Expenses  $27,221  Other Expenses    Interest Expense $21,978   Bad check Expense $679   Miscellaneous expense $1,248   Total Other Expenses  $23,905  Total Expenses  $263,375  Net Income  $30,189     *Credit sales represented $289,484 of this total.  year-end financial statements from their accountant. At their last meeting with their accountant, Shelley Edison, three months ago, the Edens had mentioned that they seemed to be having trouble paying their bills on time. "Some of our suppliers have threatened to put us on 'credit hold,- said Joe.428    SECTION III • LAUNCHING THE BUSINESS

4/al You Be the Consviltanit

All Is Not Paradise in Eden’s Garden: Part 1

 

 

Joe and Kaitlin Eden, co-owners of Eden’s Garden, a small nurs-
ery, lawn, and garden supply business, have just received their

Balance Sheet, Eden’s Garden Assets

Current Assets

Cash   $6,457
Accounts Receivable $29,152  
Less Allowance for $3,200 $25,952
Doubtful Accounts    
Inventory   $88,157
Supplies   $7,514
Prepaid Expenses   $1,856
Total Current Assets   $129,936
Fixed Assets    
Land   $59,150
Buildings $51,027  
Less Accumulated Depreciation $2,061 $48,966
Autos $24,671  
Less Accumulated $12,300 $12,371
Depreciation    
Equipment $22,375  
Less Accumulated Depreciation $1,250 $21,125
Furniture and Fixtures $10,295  
Less Accumulated Depreciation $1,000 $9,295
Total Fixed Assets   $150,907
Intangibles (Goodwill)   $0
Total Assets   $280,843
Liabilities    
Current Liabilities    
Accounts Payable   $54,258
Notes Payable   $20,150
Credit Line Payable   $8,118
Accrued Wages/Salaries Payable   $1,344
Accrued Interest Payable   $1,785
Accrued Taxes Payable   $1,967
Total Current Liabilities   $87,622
Long-Term Liabilities    
Mortgage   $72,846
Note Payable   $47,000
Total Long-Term Liabilities   $119,846
Owner’s Equity    
Sam Lloyd, Capital   $73,375
Total Liabilities and Owner’s

 

Income Statement, Eden’s Garden Net Sales Revenue*   $689,247
Cost of Goods Sold    
Beginning Inventory, 1/1/xx $78,271  
+ Purchases $403,569  
Goods available for Sale $481,840  
– Ending Inventory, 12,31/xx $86,157  
Cost of Goods Sold   $395,683
Gross Profit   $293,564
Operating Expenses    
Advertising $22,150  
Insurance $9,187  
Depreciation    
Building $26,705  
Autos $7,895  
Equipment $11,200  
Salaries $116,541  
Uniforms $4,018  
Repairs and Maintenance $9,097  
Travel $2,658  
Entertainment $2,798  
Total Operating Expenses   $212,249
General Expenses    
Utilities $7,987  
Telephone $2,753  
Professional Fees $3,000  
Postage $1,892  
Payroll Taxes $11,589  
Total General Expenses   $27,221
Other Expenses    
Interest Expense $21,978  
Bad check Expense $679  
Miscellaneous expense $1,248  
Total Other Expenses   $23,905
Total Expenses   $263,375
Net Income   $30,189

 

*Credit sales represented $289,484 of this total.

year-end financial statements from their accountant. At their last meeting with their accountant, Shelley Edison, three months ago, the Edens had mentioned that they seemed to be having trouble paying their bills on time. “Some of our suppliers have threatened to put us on ‘credit hold, said Joe.

 

   

 

 

 

 
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