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    FINA3010 Assign2 1297 GF 2024

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    FINA3010 Assign2 1297 GF 2024

    Uploaded by

    maryanecardoso89
    2 views3 pages

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    FINA3010_Assign2_1297_GF_2024

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    2 views3 pages

    FINA3010 Assign2 1297 GF 2024

    Uploaded by

    maryanecardoso89

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 3

    Finance I FINA 3010

    Assignment 2 - Financial Statement Analysis

    Use the financial reports below to answer the two questions in the required.
    CostCutter Inc.
    Balance Sheet
    October 31, 2020
    2020 2019
    Assets
    Current Assets
    Cash 136,000 98,000
    Accounts receivable 238,000 219,000
    Allowance for doubtful accounts (2,300) 235,700 (2,100) 216,900
    Inventory 84,000 71,000
    Prepaid expenses 50 30
    Notes receivable 600 400
    Total current assets 456,350 386,330
    Capital assets
    Property, plant and equipment 1,621,100 1,234,670
    Accumulated depreciation (325,000) (208,000)
    Total capital assets 1,296,100 1,026,670
    Total assets 1,752,450 1,413,000

    Liabilities
    Current liabilities
    Accounts payable 219,000 174,000
    Unearned revenue 3,100 750
    Total current liabilities 222,100 174,750
    Long term liabilities
    Notes payable 114,000 116,200
    Total liabilities 336,100 290,950
    Equity
    Contributed Capital

    Preferred shares, $1 non-cumulative,


    20,000 shares issued and outstanding 100,000 100,000

    Common shares, 50,000 shares


    issued and outstanding 250,000 250,000
    Total contributed capital 350,000 350,000
    Retained earnings 1,066,350 772,050
    Total equity 1,416,350 1,122,050
    Total liabilities and equity 1,752,450 1,413,000

    Page 1 of 3
    Finance I FINA 3010
    Assignment 2 - Financial Statement Analysis

    CostCutter Inc.
    Statement of Changes in Equity
    October 31, 2020

    Preferred Common Retained


    Shares Shares Earnings Total
    Balance, November 1, 2019 100,000 250,000 772,050 1,122,050
    Net Income 294,300 294,300
    Balance, October 31, 2020 100,000 250,000 1,066,350 1,416,350

    CostCutter Inc.
    Income Statement
    for the year ended October 31, 2020

    2020 2019
    Sales 943,000 798,000
    Sales disc (14,000) (11,000)
    Net sales 929,000 787,000
    Cost of goods sold 424,000 335,000
    Gross profit 505,000 452,000
    Operating expenses 141,000 103,000
    Operating income 364,000 349,000
    Investment income 9,000 7,000
    Earnings before inter 373,000 356,000
    Interest expense 5,700 6,500
    Earnings before taxes 367,300 349,500
    Income tax 73,000 69,000
    Net income 294,300 280,500

    Other information
    1. No dividends were declared or paid for the years ended October 31, 2020 and 2019.
    2. The market value per common share on October 31, 2020 and 2019 were $29 and $25 respectively.
    3. Industry averages for 2020 are provided in the chart below.

    Page 2 of 3
    Finance I FINA 3010
    Assignment 2 - Financial Statement Analysis

    Required
    1. Create the chart below in Excel and calculate all the ratios listed for 2020 and 2019. For ratios
    expressed as a percentage include the percent sign in your worksheet. Round all ratios to two
    decimal places. State whether each ratio is favourable or unfavourable (F/U) compared to the
    previous year and the industry average.

    Ratio for Ratio for Is the change Industry Is the change


    2020 2019 between 2020 Average between 2020
    and 2019 and the industry
    Favorable or average
    Unfavorable Favorable or
    Unfavorable
    Current ratio 1.96
    Quick ratio 1.42
    Accounts receivable turnover 4.35
    (use net A/R and net sales)
    Average collection period 95.12
    (use net A/R and net sales)
    Inventory turnover 5.2
    Inventory holding period 75.08
    Total asset turnover 1.8
    (use net sales)
    Accounts payable turnover 8.45
    Debt to total assets 21.00%
    Equity to total assets 79.00%
    Times interest earned 50.16
    Profit Margin 30.14%
    (use net sales)
    Gross profit ratio 52.16%
    Return on assets 17.20%
    Return on equity 31.00%
    Book value per common share $14.91
    Book value per preferred share $22.00
    Earnings per share $4.32
    Price earnings ratio $6.91

    2. Choose 5 of your favorite ratios from the list above and explain why the change is favorable or
    unfavorable.

    Page 3 of 3

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