Part 1 - Financial Analysis
The condensed financial statements of Soule Company for the years 2013 and 2014 are presented below.
Soule Company
Balance Sheets
December 31
|
|
2014
|
2013
|
|
Current assets
|
|
|
|
Cash and cash equivalents
|
£ 330
|
£ 360
|
|
Accounts receivable (net)
|
470
|
433
|
|
Inventory
|
430
|
390
|
|
Prepaid expenses
|
120
|
160
|
|
Total current assets
|
1.350
|
1.343
|
|
Property, plant, and equipment
|
420
|
380
|
|
Investments
|
10
|
10
|
|
Intangibles and other assets
|
530
|
510
|
|
Total assets
|
£2.310
|
£2.243
|
|
Current liabilities
|
£ 900
|
£ 810
|
|
Long-term liabilities
|
390
|
393
|
|
Stockholders' equity-common
|
1,020
|
1,040
|
|
Total liabilities and stockholders' equity
|
£2.310
|
£2.243
|
Soule Company
Income Statements
For the Years Ended December 31
|
|
2014
|
2013
|
|
Sales revenue
|
£4,000
|
£3,600
|
|
Costs and expenses
|
|
|
|
Cost of goods sold
|
984
|
895
|
|
Selling and administrative expenses
|
2,400
|
2,330
|
|
Interest expense
|
10
|
20
|
|
Total costs and expenses
|
3.394
|
3.245
|
|
Income before income taxes
|
606
|
355
|
|
Income tax expense
|
242
|
142
|
|
Net income
|
£ 364
|
£ 213
|
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.