Financial Statement Analyses Exercise

Case #5 - Page 654

1. Examine the comparative balance sheet and comparative income statements presented on page 655 of your text. 

2. Using Excel, prepare a Common Size Income Statement for the years 2006, 2007, and 2008. 

3. Using Excel, prepare a Comparative Balance Sheet showing the net change, and the percentage change, between the years 2007 and 2008. 

4. Calculate the following ratios for the 2008 year:

• Current (or Working Capital) Ratio,
• Quick Ratio (or Acid Test),
• Collection Period,
• Inventory Turnover,
• Debt Ratio
• Equity Ratio,
• Times Interest Earned Ratio,
• Rate of Return on Net Sales, and
• Rate of Return on Owner’s Equity.

    Note: To get full marks you must show your calculations. Calculate the numbers to ONE decimal place.

5. Based on your calculations above, provide a general statement outlining your opinion of the business' profitability, strengths, and weaknesses.

Reminder: Please refer to the marking key before submitting your completed exercise.