Gilligan Island Inc., provides tropical vacations. The company sells vacations 30 days in advance. Your boss has no idea of the financial condition for some time and, therefore, is asking you to help with a more current assessment of the company's position for his/her meeting with the CEO.
Below you will find a series of accounts that represent the trial balance of the business firm. These accounts encompass both income statement and balance sheet accounts.
|
|
2009
|
2010
|
2011
|
|
Accumulated depreciation
|
176,580
|
209,050
|
242,725
|
|
Retained earrings
|
337,602
|
510,731
|
648,528
|
|
Sales
|
3,702,480
|
3,961,654
|
3,981,462
|
|
Cash
|
35,750
|
62,635
|
86,595
|
|
Bonds payable
|
421,000
|
334,000
|
325,000
|
|
Accounts receivable
|
246,580
|
293,430
|
349,182
|
|
Depreciation expense
|
31,265
|
32,470
|
33,675
|
|
Common stock shares outstanding
|
80,000
|
80,000
|
80,000
|
|
Plant and equipment, at cost
|
984,021
|
1,026,880
|
1,151,210
|
|
Taxes
|
79,484
|
93223
|
74,198
|
|
Accounts payable
|
62,685
|
116,696
|
188,569
|
|
Common stock, $1 par
|
75,000
|
75,000
|
75,000
|
|
Inventory
|
185,652
|
243,117
|
312,622
|
|
Prepaid expenses
|
6,575
|
21,525
|
26,325
|
|
Cost of goods sold
|
2,665,786
|
2,879,049
|
2,936,630
|
|
Interest expense
|
12,532
|
10,325
|
10,235
|
|
Selling and administrative expenses
|
765,800
|
773,458
|
788,927
|
|
Marketable securities
|
12,545
|
23,564
|
24,153
|
|
Other current liabilities
|
123,256
|
150,674
|
195,265
|
|
Capital paid in excess of par (common)
|
275,000
|
275,000
|
275,000
|
Required: Prepare (using Excel) a proper form income statement and balance sheet for the company. Make sure to create a proper form statement. Make sure you include these statements in your PowerPoint with speaking notes.
Based on the financial statements that were prepared with this data, complete the following financial ratio calculations and provide a narrative discussion of these results as compared to industry averages (provided.)
Ratios required:
|
Ratio
|
Industry Average
|
|
1. Profit margin
|
3.2%
|
|
2. Return on assets (use ending assets)
|
6.0%
|
|
3. Return on common equity (use ending common equity)
|
15.6%
|
|
4. Receivable turnover (use ending receivables)
|
8.5 x
|
|
5. Inventory turnover (use ending inventory)
|
12.0 x
|
|
6. Fixed asset turnover (use ending fixed asset balance)
|
5.75 x
|
|
7. Total asset turnover (use ending assets)
|
1.89 x
|
|
8. Current ratio
|
3.10
|
|
9. Quick ratio
|
1.40
|
|
10. Debt to total assets (use ending assets)
|
37.0%
|
Your solution should include the required ratios for each year and then provide speaking notes regarding the results as they compare to the industry averages. This analysis should discuss whether or not company is better or worse than the industry average but it should not stop there. You should also include a speaking notes as to why or how the difference can be explained, i.e., the reason for the variance. The final slide is to be providing a recommendation to improve the finances of the company