Develop quantitative skills necessary to read interpret and

Question

Financial and Managerial Accounting Learning Objectives:

1. Acquire a comprehensive understanding of the principles used to prepare and present financial statements.

2. Relevant application of knowledge to read and understand financial statements and to observe the effects of routine business transactions on them.

3. Develop quantitative skills necessary to read, interpret and perform the calculations for the accounting reports involved in cost control and profit planning.

4. Evaluate and identify financial strengths and weaknesses of a business through appropriate conceptual analysis.

5. Analyse information and knowledge effectively in order to develop meaning to solve complex problems and make decisions ;

Part 1 - Financial Analysis

The condensed financial statements of Soule Company for the years 2013 and 2014 are presented below.

Soule Company Balance Sheets December 31
	2014	2013
Current assets
Cash and cash equivalents	£  330	£  360
Accounts receivable (net)	470	433
Inventory	430	390
Prepaid expenses	120	160
Total current assets	1,350	1,343
Property, plant, and equipment	420	380
Investments	10	10
Intangibles and other assets	530	510
Total assets	£2,310	£2,243
Current liabilities	£  900	£  810
Long-term liabilities	390	393
Stockholders' equity-common	1,020	1,040
Total liabilities and stockholders' equity	£2,310	£2,243

Soule Company Income Statements For the Years Ended December 31
	2014	2013
Sales revenue	£4,000	£3,600
Costs and expenses
Cost of goods sold	984	895
Selling and administrative expenses	2,400	2,330
Interest expense	10	20
Total costs and expenses	3,394	3,245
Income before income taxes	606	355
Income tax expense	242	142
Net income	£  364	£  213

Compute the following ratios for 2014 and 2013.

(a) Current ratio.

(b) Inventory turnover. (Inventory on 12/31/12 was £326.)

(c) Profit margin ratio.

(d) Return on assets. (Assets on 12/31/12 were £2,100.)

(e) Return on common stockholders' equity. (Stockholders' equity on 12/31/12 was £960.)

(f) Debt to total assets ratio.

(g) Times interest earned.

Critically evaluate your ratio calculations and conclude on the current state of the company.

Part 2 - Performance Evaluation

Evaluate the financial performance of a company of your choosing using the knowledge and technical skills that you have gained during the course so far. Provide a theoretical explanation of any ratio analysis. No need to recalculate ratios, often the financial reports provides these.

Present your findings in a Management Business Report wordage should be 1500 +/- 10%.

Answer 1

The following assignment that is based on Financial and Managerial Accounting Learning Objectives: 1. Obtain a comprehensive understanding of the principles utilized to get ready and present financial statements. 2. Relevant application of information to read and understand financial statements and to examine the consequences of routine business transactions on them. 3. Expand quantitative skills needed to read, interpret and perform the computations for the accounting reports involved in cost control and profit planning. 4. Evaluate and recognize financial strengths and weaknesses of a business through appropriate conceptual analysis. 5. Analyse information and knowledge effectively in order to expand meaning to resolve complex issues and make decisions;