| | Purpose of Assignment |
| | This activity helps students recognize the significant role accounting plays in providing financial information to management for decision making through the evaluation of financial statements. This experiential assignment requires students to use ratios to evaluate and analyze a company’s liquidity, solvency, and profitability. |
| | Two-Rivers Inc. (TRI) manufactures a variety of consumer products. The company's founders have run the company for thirty years and are now interested in retiring. Consequently, they are seeking a purchaser, and a group of investors is looking into the acquisition of TRI. To evaluate its financial stability, TRI was requested to provide its latest financial statements and selected financial ratios. Summary information provided by TRI is presented below. |
| | Year 1 Year 0 | Industry Average |
| | Current Ratio 1.61 1.60 | 1.63 |
| | Quick Ratio 0.64 0.65 | 0.68 |
| | Times Interest Earned 8.55 8.60 | 8.45 |
| | Debt to Equity 0.86 0.75 | 1.03 |
| | Inventory Turnover 3.21 3.17 | 3.18 |
| | Required: |
| | a.IN EXCEL: Calculate the financial ratios for the fiscal year Year 2. (use excel to create formulas and calculate results (see excel tutorial if needed)) Do not just type in results. The necessary ratios are those found in the TRI documents. You will be required to do research outside of the book to complete the ratios. |
| | b.IN A WORD DOCUMENT: In a maximum of 500 words, analyze what each of these financial ratios means in terms of TRI's financial stability and operating efficiency. I am looking for a dollar for dollar explanation of what they mean for TRI- not a general definition. For example, a current ratio of 1.2 means that for every dollar of current debt, the company has $1.20 in current assets to pay them. |
| | Please make sure you express the ratios properly (as a decimal, dollar or percentage). |
Accounting2018
ACC561-Week1-FinancialStatement.xlsx
