Financial Management Assignment

Please see two part Financial Management assignment attached. Each assignment must be on two separate word documents. This assignment is due tomorrow, 1/9/18 at 1pm EST.   

Part 1

Discuss the importance of quality in a firm’s financial statements and how you would go about evaluating the quality of a firm’s financial statement. What do you consider to be the four main pro forma financial statements to financial forecasting, and why? List All references.

Part 2

Solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance. 

  

Balance Sheet as of December 31, 2010

 

Gary and Company

 

Cash  

$45

Accounts payables  

$45

 

Receivables    

66

Notes payables 

45

 

Inventory

159

Other current liabilities 

21

 

Marketable securities

33

Total   current liabilities

$111

 

Total   current assets 

$303

 

Net fixed assets  

147

Long   Term Liabilities

 

Total   Assets  

$450

Long-term debt  

24

 

Total   Liabilities 

$135

 

 

Owners   Equity

 

Common stock

$114

 

Retained earnings

201

 

Total stockholders’ equity

315

 

Total   liabilities and equity

$450

  

Income Statement Year 2010

 

 

Net sales

$795

 

Cost of goods sold 

660

 

Gross   profit  

135

 

Selling expenses  

73.5

 

Depreciation

12

 

EBIT

49.5

 

Interest expense  

4.5

 

EBT

45

 

Taxes (40%)  

18

 

Net   income

27

1. Calculate the following ratios AND interpret the result against the industry average:

  

Ratio

Your Answer

Industry Average

Your Interpretation
(Good-Fair-Low-Poor)

 

Profit   margin on sales

3%

 

Return   on assets

9%

 

Receivable   turnover

16X

 

Inventory   turnover

10X

 

Fixed   asset turnover

2X

 

Total   asset turnover

3X

 

Current   ratio

2X

 

Quick   ratio

1.5X

 

Times   interest earned

7X

2. Analysis:

Give your interpretation of what the ratios calculations show and how the business can use this information to improve its performance. Justify all answers. List all references.