Individual Financial Analysis Project
Instructions:
Go to the CanGo intranet found in the Report Guide tab under Course Home
Use the financial statements from the most recent year to fill in the table below.
You may find some formulae calling for an average, e.g., average inventory, average receivables.
Because we only have the Balance sheet for one year, you can only use the one year number not an average.
Assume interest expense is $0.00
Be careful of the Debt equity ratio. The review covers debt asset ratio as an example of how to calculate ratios and that is different from debt equity ratio, and that is different from the debt equity ratio so think about how you calculate the debt equity ratio using the debt asset ratio as an example.
Be sure to cite your references - Please do not use Investopedia or financeformulas.net as a source of reference.
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Ratio
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Formula (express the ratio in words)
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Detailed calculation (actual numbers from financial statements used for the calculation)
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Final number (final result of the detailed calculation)
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Explanation of why ratio is important
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Earned points (up to 3 points per "box"/cell)
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Instructor feedback
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Example:
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Term A/Term B (Term A divided by Term B)
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1000/2000
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.50
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This is the explanation of the role of this ratio and why it is important
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3
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Efficiency Ratio: Receivables Turnover
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Efficiency Ratio: Inventory Turnover
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Financial Leverage Ratio: Debt/Equity Ratio
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Liquidity Ratio: Current Ratio
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Liquidity Ratio: Quick Ratio
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Liquidity: Working Capital
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Profitability Ratio: Return on Assets
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Profitability Ratio: Return on Sales
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Assumptions:
At the beginning of 2009, CanGo purchased the online gaming company. This purchase was for cash, paid for through the proceeds of the IPO and results in goodwill.
90% of the online book sales comes from JIT, the other 10% through the inventory which CanGo possesses. 100% of the CD/DVD/MP3 come through CanGo inventory. The result is that 80% of ALL sales is JIT and 20% is inventory.
There is one warehouse for shipping of books and one plant for manufacturing.
There are three divisions: a CD/DVD/MP3 division, an online gaming division and a books division. All manufacturing takes place in the CD/DVD/MP3 division.
The IPO took place at the beginning of 2009.
The CD/DVDs were customized beginning in 2008. The MP3 players were built beginning in the start of 2009.
The online gaming company was purchased for $30,000,000 and both Elizabeth and Andrew initiated the process.
The company began in 2006, has a VC infusion in 2007 and 2008. It showed a profit in 2008 and 2009. Its only profitable division is the online book sales division.
It has some type of international operations, hence the need for a "translation gain or loss" in owner's equity.
It has an extraordinary loss from fire and a sale of a segment of its business in 2009.
Balance Sheet
ASSETS December 31, 2009
Cash $20,900,000
Marketable Securities $117,000,000
Accounts Receivable $33,000,000
Less: Allowance for Bad Debts $(880,000)
Net Accounts Receivable $32,120,000
Inventory
Raw Materials $2,000,000
Work-in-process $1,000,000
Finished Goods $5,000,000
Inventory Purchased for Resale $24,000,000
Total Inventory $32,000,000
Plant, Property and Equipment $6,700,000
Less: Accumulated Depreciation $(320,000)
Net Plant, Property and Equipment $6,380,000
Prepaid Expenses $200,000
Goodwill and Other Purchased Intangibles $28,000,000
Less: Amortization $(700,000)
Net Goodwill and Other Purchased Intangibles $27,300,000
Total Assets $235,900,000
LIABILITIES AND OWNERS' EQUITY
Accounts Payable $22,000,000
Accrued Advertising $11,800,000
Other Liabilities and Accrued Expense $1,400,000
Current Portion of Long-Term Debt $2,300,000
Long Term Debt $57,400,000
Preferred Stock, $100 par value per share, 100,000 authorized, 0 shares issued and outstanding $0
Common Stock, $1 par value per share,
250,000,000 shares authorized, 13,000,000 shares
issued, 12,900,000 outstanding $13,000,000
Additional Paid-in-Capital in excess of par value, Common Stock $117,000,000
Treasury Stock $(1,000,000)
Retained Earnings (less Cash Dividends Paid) $12,000,000 $11,000,000
Total Liabilities and Owner's Equity $235,900,000
Income Statement
December 31, 2009 December 31, 2008
Sales Revenues $51,000,000 $10,300,000
Less: Sales Returns $(1,000,000) $(300,000)
Net Sales Revenues $50,000,000 $10,000,000
Less: Cost of Goods Sold $(9,000,000) $(4,000,000)
Gross Profit $41,000,000 $6,000,000
Operating Expenses:
Advertising and Sales $(26,000,000) $(3,000,000)
Depreciation $(160,000)
Salaries and Wages $(1,700,000) $(1,400,000)
Product Development $(4,000,000) $(1,200,000)
Merger and Acquisition Related Costs, including
Amortization of Goodwill and Other Intangibles $(700,000) $0
Total Operating Expenses $(32,560,000)
Income from Continuing Operations Before Income Taxes $8,440,000
Less: Income Taxes at 35% $(2,954,000)
Income from Continuing Operations $5,486,000
Discontinued Operations:
Income from Operations of Discontinued Division
(less applicable income taxes) $350,000
Loss on Disposal of Discontinued Division
(less applicable income taxes) $(150,000)
Total Gain from Discontinued Operations $200,000
Extraordinary Items:
Loss from fire (less applicable income taxes) $(200,000)
Net Income $5,486,000
Divisional Revenues
Books $15,000,000 $7,000,000
Online gaming $25,000,000
Customized MP3/CD/DVD $10,000,000 $3,000,000
Customized MP3/CD/DVD Inventory at end of 2009 $8,000,000