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.
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Soule Company
Balance Sheets December 31
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2014
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2013
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Current assets
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Cash and cash equivalents
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£ 330
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£ 360
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Accounts receivable (net)
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470
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433
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Inventory
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430
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390
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Prepaid expenses
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120
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160
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Total current assets
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1,350
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1,343
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Property, plant, and equipment
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420
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380
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Investments
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10
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10
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Intangibles and other assets
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530
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510
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Total assets
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£2,310
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£2,243
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Current liabilities
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£ 900
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£ 810
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Long-term liabilities
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390
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393
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Stockholders' equity-common
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1,020
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1,040
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Total liabilities and stockholders' equity
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£2,310
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£2,243
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Soule Company
Income Statements
For the Years Ended December 31
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2014
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2013
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Sales revenue
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£4,000
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£3,600
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Costs and expenses
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Cost of goods sold
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984
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895
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Selling and administrative expenses
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2,400
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2,330
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Interest expense
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10
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20
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Total costs and expenses
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3,394
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3,245
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Income before income taxes
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606
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355
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Income tax expense
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242
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142
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Net income
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£ 364
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£ 213
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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%.