The information contained in your selected organization’s balance sheet and income statement to calculate the following:
•Liquidity ratios ◦Current ratio
◦Acid-test, or quick, ratio
◦Receivables turnover
◦Inventory turnover

•Profitability ratios ◦Asset turnover
◦Profit margin
◦Return on assets
◦Return on common stockholders’ equity

•Solvency ratios ◦Debt to total assets
◦Times interest earned


Show your calculations for each ratio.

Create a horizontal and vertical analysis for the balance sheet and the income statement.

Write a 350- to 700-word memo to the CEO of your selected organization in which you discuss your findings from your ratio calculations and your horizontal and vertical analysis. In your memo, address the following questions:
•What do the liquidity, profitability, and solvency ratios reveal about the financial position of the company?
•Which users may be interested in each type of ratio?
•What does the collected data reveal about the performance and position of the company?

Format your memo consistent with APA guidelines.

Income Statement
1/1/2008 - 12/31/2008



Revenue $3,249,580.53

Direct Expenses
Salaries & Wages $487,437.08
Vehicle Maintenance $64,991.61
Fuel $20,449.80
Traps & Chemicals $1,378,203.63
$1,951,082.12 $1,951,082.12

Indirect Expenses
Rent $39,338.17
Licenses $2,480.00
Insurance $103,613.43
Administrative Salaries $150,250.00
Commissions $16,991.61
Payroll Taxes $72,014.66
Legal Expenses $12,000.00
Accounting Fees $7,000.00
Office Supplies $7,800.00
Utilities $10,806.40
Advertising Expenses $116,000.00
Bad Debts $122,138.64
Depreciation Expense $94,925.75
Misc. Expense $50,000.00
$805,358.66 $805,358.66
Total Expenses $2,756,440.78 $2,756,440.78

Net Income $493,139.75

1/1/2007 – 12/31/2007
Revenue
$3,893,027.78
Direct Expenses
Salaries & Wages
$583,954.17
Traps & Chemicals
$1,651,100.81
Fuel
$19,177.32
Vehicle Maintenance
$77,860.56
$2,332,092.85
$2,332,092.85
Indirect Expenses
Rent
$38,192.40
Licenses
$2,480.00
Interest Expense
$0.00
Insurance
$103,613.43
Admin. Salaries
$133,500.00
Commissions
$52,860.49
Payroll Taxes
$84,734.61
Legal Expenses
$12,000.00
Accounting Fees
$7,000.00
Office Supplies
$7,800.00
Utilities
$9,824.00
Advertising Expenses
$81,510.00
Bad Debts
$103,493.45
Depreciation Expense
$94,925.75
Misc. Expenses
$60,000.00
$791,934.13
$791,934.13
$3,124,026.98
$3,124,026.98
Net Income
$769,000.80

Balance Sheet
12/31/2008




Current Assets
Cash $818,440.68
Accounts Receivable $812,395.13
Inventory $205,934.30
Total Current Assets $1,836,770.12

Fixed Assets
Vehicles $268,750.00
Tools $110,953.00
Less Accumulated Depreciation ($284,431.95)
Total Fixed Assets $95,271.05

Total Assets $1,932,041.17


Liabilities

Current Liabilities
Accrued Payroll Taxes $36,007.33
Accounts Payable $270,798.38
Total Current Liabilities $306,805.71

Long-Term Liabilities $0.00

Total Liabilites $306,805.71


Stockholders Equity
Common Stock
(1,000,000 authorized shares at $1 par) $70,000.00
Retained Earnings $1,062,095.71
Net Income $493,139.75
Total Stockholders Equity $1,625,235.46


Total Liabilities & Stockholders Equity $1,932,041.17


Balance Sheets
12/31/2007
Current Assets
Cash
$291,703.44
Accounts Receivable
$811,047.45
Inventory
$205,934.30
Total Current Assets
$1,308,685.20
Fixed Assets
Vehicles
$268,750.00
Tools
$110,953.00
Less Accumulated Depreciation
($189,506.20)
Total Fixed Assets
$190,196.80
Total Assets
$1,498,882.00
Liabilities
Current Liabilities
Accrued Payroll Taxes
$42,367.31
Accounts Payable
$324,418.98
Total Current Liabilities
$366,786.29
Long‐Term Liabilities
Auto Loans
$0.00
Total Long‐Term Liabilities
$0.00
Total Liabilities
$366,786.29
Stockholders Equity
Common Stock (1,000,000 authorized shares at $1 par)
$70,000.00
Retained Earnings
$293,094.91
Net Income
$769,000.80
Total Stockholders Equity
$1,132,095.71
Total Liabilities & Stockholders Equity
$1,498,882.00

 

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