Question

You just began a position as a financial accountant at Peyton Approved. In this role, your first task is to prepare the company’s financials for the year-end audit. Additionally, the company is interested in expanding its business within the next year. They would like your support in assessing their ability to meet their goals.

ITEMS TO COMPLETE FOR THIS MILESTONE (Blue Tabs): GENERAL You just began a position as a financial accountant at Peyton Approved. In this role, your first task is to prepare the company's financials for the year-end audit. Additionally, the company is interested in expanding its business within the next year. They would like your support in assessing their ability to meet their goals. TRIAL BALANCE 2017 TAB Using the Peyton Approved financial data (see bottom of page): Create the necessary adjusting journal entries. Use the REF column to reference the entry to each event Complete the adjusted trial balance REVISED FINANCIAL STATEMENTS Using the preliminary financial statements (yellow tabs) and the Trial Balance 2017, prepare the following statements: Balance Sheet (BS 2017 Revised tab) Income Statement (IS 2017 Revised tab) Retained Earnings Statement (RE 2017 Revised tab) Statement of Cash Flows (CF 2017 Revised tab) RATIO ANALYSIS Using the revised 2017 financial statements, 2016 financial statements (orange tabs), and 2015 financial statements (orange tabs), prepare a ratio analysis with the following ratios: Current Ratio (Working Capital) Quick Ratio A/R Turnover Inventory Turnover Gross margin Return on Sales Return on Equity Return on Assets

Answer 1

ANSWER:

Calculations for 2016:

Current Ratio(Working Capital): Values taken basis the Balance Sheet of 2016):

Total Current Assets   

Total Current Liabilities

Total Current Assets = 96,742 and Total Current Liabilities = 18,669.30

= 96,742 = 5.18

18,669.30

Quick Ratio :   Liquid Assets

Current Liabilities

Liquid Assets = Cash+Accounts Receivables + Baking Supplies + Misc Supplies

= 43,165.39+42,633 + 7,318.86 + 55.50 = 93,172.75

Current Liabilities = 18,669.30

Quick Ratio = 93,172.75   = 4.99

18,669.30

A/R Turnover = Net Credit Sales Net Credit Sales = Sales - Sales Returns

Average Accounts Receivables = Bakery Sales + Merchandise Sales

= 214256.48 + 770.76 = 2,15,027.24

Average Accounts Receivables = Beginning A/R + Closing Balance = (35118.97 + 42,633)/2 = 38,875.99

A/R Turnover = 2,15,027.24/ 38,875.99 = 5.53

Inventory Turnover: = Sales / Average Inventory , Merchandise Sales = 777.76 ,

Average Inventory = (Beginning Inventory + Closing Inventory) / 2

= (580.27 + 794.97) / 2 = 687.62

= 777.76 / 687.62 = 1.13

Gross Margin: (Net Sales - COGS)/Net Sales , Net Sales =   2,15,027.24

COGS = Total Cost of Goods Sold = 73,709.23

= (2,15,027.24 - 73,709.23)/ 2,15,027.24 = 0.65

Return on Sales:   (Operating Profit / Net Sales) * 100 , Operating Profit = Net Income + Interest Expense

= 29,072.56 + 523.17 = 29,595.70

Net Sales = 2,15,027.24 , Return on Net Sales = 29,595.70/ 2,15,027.24* 100 =  13.76 %

Return on Equity: Net Income/ SHareholder's equity = 1,12,745.45 / 70,144.84 = 1.61

Return on assets: Net Income / Average Total Assets, Net Income = 1,12,745.45 , Average Total Assets = (total assets beginning + total assets at end)/2 = (77,315.09 + 96,742.72) / 2 = 87,208.91

Return on assets = 1,12,745.45 / 87,208.91 = 1.29

Calculations for 2017:

As per the statements above, i.e. Balance Sheet (Revised) 2017 (marked in blue), the same had not been shared which would create hinderance in calculating ratios for 2017 and further doing analysis.

Please share the image of the same, also if the same is available with you. Please refer the calculations above and calculate the ratios accordingly.

Comment for any doubts.