Group ssignment 2

For the course Accounting and Finance for Mangers

Target group: MBA students
Requirements
 Legible and neat Page format will be rewarded.
 Strictly follow the instruction given below.
 The assignment paper is to be submitted on final exam date.
 Clear and observable computation is required
 The project will be marked out of 25%.
 Doing this assignment negligently will reduce your point.

Instruction: Show your computation (NB. Neatness and clear presentations has its own values)

1. The following information relates to highlight company. Prepare Financial Statement Analysis as
required below.

Highlight Company
Statement of Profit or loss
for Year Ending December 31, 2019-2021
2021 2020 2019
Sales 7,035,600.00 6,034,000.00 3,432,000.00
Cost of goods sold 5,875,992.00 5,528,000.00 2,864,000.00
Gross profit 1,159,608.00 506,000.00 568,000.00
Total operating expenses 666,960.00 636,948.00 377,572.00
EBIT 492,648.00 (130,948.00) 190,428.00
Interest expense 70,008.00 136,012.00 43,828.00
EBT 422,640.00 (266,960.00) 146,600.00
Taxes (40%) 169,056.00 (106,784.00) 58,640.00
Net income 253,584.00 (160,176.00) 87,960.00

Highlight Company
Statement of Positions
December 31, 2019-2021
2021 2020 2019
Cash 85,632.00 7,282.00 57,600.00
Accounts receivable 878,000.00 632,160.00 351,200.00
Inventories 1,716,480.00 1,287,360.00 715,200.00
Total current assets 2,680,112.00 1,926,802.00 1,124,000.00
Gross fixed assets 1,197,160.00 1,202,950.00 491,000.00
Less accumulated depreciation 380,120.00 263,160.00 146,200.00
Net fixed assets 817,040.00 939,790.00 344,800.00
Total assets 3,497,152.00 2,866,592.00 1,468,800.00
LIABILITIES AND EQUITY
Accounts payable 436,800.00 524,160.00 145,600.00
Notes payable 300,000.00 636,808.00 200,000.00

1
Accruals 408,000.00 489,600.00 136,000.00
Total current liabilities 1,144,800.00 1,650,568.00 481,600.00
Long-term debt 400,000.00 723,432.00 323,432.00
1,544,800.00 2,374,000.00 805,032.00
Common stock 1,721,176.00 460,000.00 460,000.00
Retained earnings 231,176.00 32,592.00 203,768.00
Total equity 1,952,352.00 492,592.00 663,768.00
Total liabilities and equity 3,497,152.00 2,866,592.00 1,468,800.00

Industry Average for three years

i. Current Ratio 2.74
ii. Acid-Test (Quick) 1.00
iii. Debt-to-Equity 1.33
iv. Debt-to-Total-Assets 0.50
v. Total Capitalization 0.35
vi. Interest Coverage 4.25
vii. Receivable Turnover 9.00
viii. Average Collection Period 40.55
ix. Inventory Turnover 6.10
x. Total Asset Turnover 2.60
xi. Gross Profit Margin 0.17
xii. Net Profit Margin 0.03
xiii. Return on assets 9.10
xiv. Return on Equity 0.18

Required: calculate ratio analysis with detailed interpretation

A. Liquidity ratio
B. Activity ratio
C. Debt management ratio
D. Profitability ratio