1) Marty Monk Fisher owns largest motorcycle dealership in southern Ohio. Recently, he was approached by Bob Sherman, founder of Mandrake Motorcycles, and offered opportunity to be sole distributor of Mandrake cycles in the state. Acceptance of offer will need Monk to open dedicated Mandrake showroom and repair facility and, obviously, stock Mandrake cycles and parts. Monk is quite impressed by Mandrake product but before making major investment, he wishes to be confident that company will be around for long haul. Accordingly, he has asked you to analyze audited financial statements of Mandrake for pervious two years.
a. Create a horizontal and vertical analysis of 2009 and 2008 financial statements.
b. Compute following ratios for 2009 and 2008: return on assets; gross margin percentage, receivables turnover, days sales in receivables; inventory turnover; days sales in inventory; debt to equity; and times interest earned.
c. Based on analysis in parts (a) and (b), describe on any matters which Monk must probe in upcoming meeting with Bob Sherman from Mandrake.
d. Based on limited information available, do you think Monk must open Mandrake showroom?