Running head: FINANCIAL MANAGEMENT 1

CASE STUDY FOR COMIC BOOK SALES PROVIDED BY THE EXCEPTIONAL SERVICE

GRADING COMPANY AND THE COMPANY EXPANSION PLANS TO ASSESSING

OTHER PUBLICATION FORMATS, SUCH AS CERTIFYING LARGE MAGAZINES AND

MOVIE POSTERS.

University of The People

Written Assignment for Unit 1

BUS 5111 Financial Management

November 16, 2020.

Financial Statement Review, Capital Structure, and Bankruptcy Issues 2

Presentation:

A Ratio is the connection between two figures and can be appeared as a division or a

rate. It is the connection between specific things in the Financial Statements. Proportions are

acknowledged as helpful guides in surveying administrative proficiency, gainfulness, and the

obligation limit of an organization. Proportions are utilized by all clients inside the Business as

indeed, as all clients outside the Business. A portion of these are speculators, grantors of credit,

the board and so on.

1. Gross Profit margin Ratio:

Net overall revenue is a proportion that estimates the amount of each dollar of income is

left over in the wake of paying the expense of merchandise sold (COGS). The gross overall

revenue rate discloses to us that The Exceptional Service Grading Company has 29.31% of its

aggregate incomes left over after it pays the immediate expenses related with making its items

(Machine gear-pieces). The gross net revenue means that the money related achievement and

reasonability of an organization and with this organization expanding the proportion with 4.48%

from the past year, it proposes that they have expanded their net revenue, either by expanding

their income or diminishing their expenses.

2. Current Ratio:

The Exceptional Service Grading Company rate in 2018 is 1.70 an expansion from 1.39 in 2017.

A pace of more than 1 is viewed as uplifting news. There is no upper-end on what is "to an

extreme", not withstanding, an exceptionally high current proportion may show that the

organization is leaving over abundance money unused that could be utilized to put resources into

becoming the organization. The present proportion is utilized to gauge an organization's capacity

to take care of short- term liabilities with current resources. It demonstrates the money related
Financial Statement Review, Capital Structure, and Bankruptcy Issues 3

soundness of the organization as it considers the heaviness of the complete current resources

versus the all-out current liabilities and how it can expand the liquidity of its present advantages

for settle obligation and payables.

The Exceptional Service Grading Company

2018 2017
1. Gross Profit Margin Ratio
(Total Revenue – COGS) / Total Revenue
(9,200,000-6,503,100)/9,200,000 (6,595,400-4,957,800)/6,596,400
29.31% 24.83%

2. Current Ratio
Current Assets / Current Liabilities
5,652,200/3,325,950 4,576,900/3,292,850
1.70 1.39
3. Debt Ratio
Total Liabilities / Total Assets
4,170,300/7,007,800 4,067,900/5,875,400
59.5% 69.2%
4. Quick Ratio / Acid Test (>1:1)
Current Assets - Stock / Current Liabilities
(5,652,200-89,800)/3,325,950 (4,576,900-100,200)/3,292,850
1.67 1.36
5. Net Profit Margin Ratio
Net profit/Total Revenue
1,330,000/9,200,000 454,500/6,595,400
14.5% 7%
Financial Statement Review, Capital Structure, and Bankruptcy Issues 4

3. Debt Ratio:

The obligation proportion is utilized to gauge the general measure of an organization's

advantages that are given from obligation. The Exceptional Service Grading Company's

obligation proportion in 2018 is 59.5%, down from 69.2% in 2017. This demonstrates 59.5% of

the organization's resources are subsidized by obligation. The lessening of around 10% from

2017, recommends that the organization had diminished the money on resources, an advance

could have been settled. The obligation proportion, otherwise called the obligation to resource

proportion, demonstrates the level of advantages that are being financed with obligation. The

higher the proportion, the more prominent the level of influence and monetary hazard. The

obligation proportion is ordinarily utilized by loan bosses to decide an organization's capacity to

reimburse its obligation, and whether extra advances will be expanded. Financial specialists

once more, utilize the proportion to ensure the organization is dissolvable, ready to meet current

and future commitments, and can produce an arrival on venture.

4. The Quick Ratio (Acid Test):

This proportion measures the capacity of the organization to pay its present liabilities out of

quick feasible current resources when there is a criticalness to pay lenders. As stock and different

less fluid current resources, for example, prepaid costs, are the least fluid of advantages, we need

to prohibit them from current resources. Current Assets short Stock is referred to as Quick

Assets. The organization has $1 Quick resources for each $1 Current liabilities. A Company with

a Quick proportion of more than 1:1 should breeze through the Acid Assessment, as there can be

little uncertainty that such an organization will have the option to meet its current commitments

at short notification. Be that as it may, it isn't a definitive measure, and an organization with a
Financial Statement Review, Capital Structure, and Bankruptcy Issues 5

lower proportion can even now be fluid. Clearly this proportion will be lower than the current

proportion, yet the distinction between the two proportions; for example, the hole will

demonstrate the degree by which current resources are comprised of stock, The more extensive

the hole between the two proportions, the higher the extent of stock and prepaid costs to other

current resources. The speedy proportion can likewise help the examiner in recognizing a

lopsided increment (or decline) in stock, comparative with other current resources. (Haasbroek,

2005).

5. Net Profit Margin Ratio:

At the point when net benefit is partitioned by all out income you will get the net overall revenue

proportions. The net advantage rate is the extent of after-charge advantages to net arrangements.

It reveals the remainder of the advantage after all costs of creation, association, and financing

have been deducted from arrangements, and individual obligations saw. The Exceptional Service

Grading Company's net revenue proportion in 2018 is 14.5%, up from 7% in 2017. This exhibits

the association's money related condition is vastly improved from earlier years.

Impediments:

A Ratio itself is of almost no worth, its importance increments when:

• It is contrasted and a similar proportion for a progression of continuous years. Changes in

proportions from year to year can be useful in showing patterns.

• It is contrasted and different proportions in the equivalent fiscal reports.

• It is contrasted and Industry standards (for example by contrasting proportions and

another organization in a similar line of business.)

Financial Statement Review, Capital Structure, and Bankruptcy Issues 6

At the point when a few proportions all point a similar way, the pattern cannot be overlooked.

Countless proportions can be determined from the information contained in a lot of budgetary

articulations. A few proportions are of lesser criticalness than others, and we will focus on the

most significant ones, by and large utilized by banks. The primary impediment with the

examination is that the bookkeeping information, which is utilized for investigation, is

communicated as far as fiscal worth and quantitative in nature. Subsequently, any characteristic

that cannot be communicated regarding fiscal worth would in general be overlooked. Variables

like pending strikes are thought of, however, the organization's HR is not evaluated, nor is the

effectiveness of apparatus and hardware revealed. Subjective data in the budget summaries

(executive's report, director's report, and so forth.) ought to be examined cautiously for signs to

an undesirable circumstance, which is not evaluated in money related terms. (Haasbroek, 2005)

References

Financial Ratios. Corporate Finance Institute. (2019, August 6). Retrieved from

https://corporatefinanceinstitute.com/resources/knowledge/finance/financial-ratios/

Haasbroek, L. F. (2005). Introduction to Credit. Johannesburg, Gauteng.

Investing Answer. (2019, October 1). Gross Profit Margin. Retrieved from

https://investinganswers.com/dictionary/g/gross-profit-margin

Lardbucket Book Project. Licensed under a Creative Commons by-nc-sa 3.0. (2015). Finance for

Managers. Retrieved from http://creativecommons.org/licenses/by-nc-sa/ 3.0/.