Due By 4/7/21
DUE BY 4/7/21
The purpose of this assignment is to analyze the financial performance of a company to make recommendations to potential investors about the purchase of stock. Studying all aspects of a company’s financial statements is necessary in order to understand the financial performance and health of a company. This is particularly important for investors trying to determine whether to buy stock in the company.
An investor has approached you about whether purchasing stock in the company would be a wise investment. Using your financial analysis of the company, you will send a letter to the investor summarizing your findings and explaining whether you recommend a stock purchase at this time. Refer to the “Annual Reports for Approved Companies” located in the course materials. You will use information in the Form 10-K to complete this assignment. Using the correct formulas and a separate tab for each analysis, calculate the following ratios using Excel
You will use information in the Form 10-K for the company you selected in the Topic 1 to complete this assignment. Using the correct formulas and a separate tab for each analysis, calculate the following ratios using Excel:
- Three liquidity ratios for the past 2 years
- Three solvency ratios for the past 2 years
- Three profitability ratios for the past 2 years
In addition, conduct research about a competitor company within the same sector using IBIS World and other topic resources. Complete a competitor analysis that includes a minimum of three ratios and compares your company to a competitor company using these ratios to determine financial performance as well as how the company compares to overall industry averages. Justify your analysis by explaining your findings.
Using your research findings and analysis of company performance in relation to industry competitors, construct a 500-750 word letter making stock purchase recommendations for a potential investor. In the letter, address the following, referencing specific ratios and comparative numbers as appropriate.
- Discuss the overall financial performance of your company in relation to industry averages and a specific competitor. Explain whether the company performed better or worse than the competition using specific numbers and providing an explanation of what the numbers illustrate.
- Recommend whether the potential investor should purchase stock in your company and justify your recommendation based upon your research and analysis of the company ratios and industry competition.
Submit the Excel file that contains your ratios and the Word file letter to LoudCloud.
While APA style is not required for the body of this assignment, solid academic writing is expected, and documentation of sources should be presented using APA formatting guidelines, which can be found in the APA Style Guide, located in the Student Success Center.
>Topic Assignment template
02
1, 2019 with the following transactions:
,000
Sheet
– 0 15,000 Assets
– 0 20,000 – 0 $ 26,000 : Made payments of $ ,000 on outstanding accounts payable
of inventory to customers for $ in cash.
of new inventory for cash
of inventory to customers on account for $ .
for a future warehouse
Example 1 2 3 4 5 6 Total 5,500 3,500 2,000 2,500 3,000 $ 26,000 1,000 $ 26,000 3,000 5,500 2,000 3,500 2,000 – 0
1
ACC
5
Week 1 Assignment
Toys, Inc began operations on December
3
1. Purchased equipment for $
1
5,000
2. Purchased inventory on account for $
6
3. Issued common stock for $
20,000
Toys, Inc’s balance sheet including those transactions as of December 31, 2019, was as follows:
Toys, Inc.
Balance
As of December 31, 2019
Assets:
Cash
$ 5,000
Receivables
– 0
Inventory
6,000
Land
Property Plant and Equipment
Total
$ 26,000
Liabilities and Equity:
Accounts Payable
$ 6,000
Note Payable
Common Stock
Retained Earnings
Total liabilities and stockholders’ equity
During January 2020, the company had the following transactions:
Example
4
1. Sold $
2,000
3,000
2. Purchased $
2,500
3. Sold $
3,500
5,500
4. During the month, received $3,500 from customers as payments on their accounts
5. Borrowed $20,000 from the bank and issued stock for $5,000 to purchase land for $
25,000
6. Paid employees $2,000 for payroll
Required:
1. Record the January 2020 transactions by adding and subtracting amounts in the rows of the following table in a way that the row totals represent the end of the month balances in the financial statements. (fill in the shaded area as needed)
2. Explain the main characteristics of the balance sheet and the income statement and the relationship between those two statements.
Balance
Transaction Number
at 12/31/19
Cash $ 5,000
(4,000)
(2,500)
$ 9,500
Receivables – 0 3,000 3,500
6,500
Inventory 6,000
(2,000)
(3,500)
Land – 0 25,000 25,000
Property Plant and Equipment 15,000 15,000
Total Assets
$ 59,000
Accounts Payable $ 6,000 (4,000)
$ 2,000
Note Payable – 0 20,000 20,000
Common Stock 20,000 5,000 25,000
Retained Earnings – 0
1,000
Total Liabilities and Equity
$ 48,000
Check (must equal zero)
(11,000)
Income Statement
Sales
$ 8,500
Cost of Goods Sold
7,500
Payroll expenses
Net Income
$ 1,000
Requirement 2
Characteristics of a Balance Sheet
A balance sheet is a financial statement found in a company’s 10k report. It summarizes a business’s assets, liabilities, and shareholders ‘ equity. Additionally, it also captures the financial position of a company at a particular point in time.
Characteristics of an Income Statement
An income statement shows the net income for a company. It may also be found in a company’s 10k report. It focuses on four key items—revenue, expenses, gains, and losses. It does not differentiate between cash and non-cash receipts (sales in cash versus sales on credit) or the cash versus non-cash payments/disbursements (purchases in cash versus purchases on credit)
Relationship between the Balance Sheet and the Income Statement
The Net income will ultimately be determined by the amounts shown in the balance sheet and income statement. This shows the amount of earnings or equity is available for a company.