course material

1. Ashford ACC205 week 5 exercise and final paper
eek Five Exercise AssignmentFinancial Ratios1. Liquidity ratios. Edison, Stagg, and
Thornton have the following financial information at the close of business on July 10:
Edison Stagg ThorntonCash $6,000 $5,000 $4,000Short-term investments 3,000 2,500
2,000Accounts receivable 2,000 2,500 3,000Inventory 1,000 2,500 4,000Prepaid expenses
800 800 800Accounts payable 200 200 200Notes payable: short-term 3,100 3,100
3,100Accrued payables 300 300 300Long-term liabilities 3,800 3,800 3,800a. Compute the
current and quick ratios for each of the three companies. (Round calculations to two
decimal places.) Which firm is the most liquid? Why?2. Computation and evaluation of
activity ratios. The following data relate to Alaska Products, Inc: 20X5 20X4Net credit sales
$832,000 $760,000 Cost of goods sold 530,000 400,000 Cash, Dec. 31 125,000 110,000
Average Accounts receivable 205,000 156,000 Average Inventory 70,000 50,000 Accounts
payable, Dec. 31 115,000 108,000 Instructionsa. Compute the accounts receivable and
inventory turnover ratios for 20X5. Alaska rounds all calculations to two decimal places. 3.
Profitability ratios, trading on the equity. Digital Relay has both preferred and common
stock outstanding. The com¬pany reported the following information for 20X7: Net sales
$1,750,000 Interest expense 120,000Income tax expense 80,000Preferred dividends
25,000Net income 130,000Average assets 1,200,000Average common stockholders' equity
500,000 a. Compute the profit margin on sales ratio, the return on equity and the return on
assets, rounding calculations to two decimal places.b. Does the firm have positive or
negative financial leverage? Briefly ex¬plain.4. Horizontal analysis. Mary Lynn Corporation
has been operating for several years. Selected data from the 20X1 and 20X2 financial
statements follow. 20X2 20X1Current Assets $86,000 $80,000 Property, Plant, and
Equipment (net) 99,000 90,000Intangibles 25,000 50,000Current Liabilities 40,800
48,000Long-Term Liabilities 153,000 160,000Stockholders' Equity 16,200 12,000Net Sales
500,000 500,000Cost of Goods Sold 322,500 350,000Operating Expenses 93,500 85,000 a.
Prepare a horizontal analysis for 20X1 and 20X2. Briefly comment on the results of your
work. 5.Vertical analysis. Mary Lynn Corporation has been operating for several years.
Selected data from the 20X1 and 20X2 financial statements follow. 20X2 20X1Current
Assets $86,000 $80,000 Property, Plant, and Equipment (net) 99,000 80,000 Intangibles
25,000 50,000 Current Liabilities 40,800 48,000 Long-Term Liabilities 153,000 150,000
Stockholders' Equity 16,200 12,000 Net Sales 500,000 500,000 Cost of Goods Sold 322,500
350,000 Operating Expenses 93,500 85,000 a. Prepare a vertical analysis for 20X1 and
20X2. Briefly comment on the results of your work. 6. Ratio computation. The financial

2. statements of the Lone Pine Company follow. LONE PINE COMPANYComparative Balance
SheetsDecember 31, 20X2 and 20X1 ($000 Omitted)20X2 20X1Assets Current Assets Cash
and Short-Term Investments $400 $600 Accounts Receivable (net) 3,000 2,400Inventories
3,000 2,300Total Current Assets $6,400 $5,300 Property, Plant, and Equipment Land $1,700
$500 Buildings and Equipment (net) 1,500 1,000Total Property, Plant, and Equipment
$3,200 $1,500 Total Assets $9,600 $6,800 Liabilities and Stockholders' Equity Current
Liabilities Accounts Payable $2,800 $1,700 Notes Payable 1,100 1,900Total Current
Liabilities $3,900 $3,600 Long-Term Liabilities Bonds Payable 4,100 2,100Total Liabilities
$8,000 $5,700 Stockholders' Equity Common Stock $200 $200 Retained Earnings 1,400
900Total Stockholders' Equity $1,600 $1,100 Total Liabilities and Stockholders' Equity
$9,600 $6,800 LONE PINE COMPANYStatement of Income and Retained EarningsFor the
Year Ending December 31,20X2 ($000 Omitted)Net Sales* $36,000 Less: Cost of Goods Sold
$20,000 Selling Expense 6,000 Administrative Expense 4,000 Interest Expense 400 Income
Tax Expense 2,000 32,400 Net Income $3,600 Retained Earnings, Jan. 1 900 Ending
Retained Earnings $4,500 Cash Dividends Declared and Paid 3,100 Retained Earnings, Dec.
31 $1,400 *All sales are on account. Instructions Compute the following items for Lone Pine
Company for 20X2, rounding all calcu¬lations to two decimal places when necessary: a.
Quick ratio b. Current ratio c. Inventory-turnover ratio d. Accounts-receivable-turnover
ratio e. Return-on-assets ratio f. Net-profit-margin ratio g. Return-on-common-
stockholders' equity h. Debt-to-total assets i. Number of times that interest is earnedFinal
paperWrite a five-to seven-page financial statement analysis of a public company, formatted
according to APA style as outlined in the Ashford Writing Center. In this analysis you will
discuss the financial health of this company with the ultimate goal of making a
recommendation to other investors. Your paper should consist of the following sections:
introduction, company overview, horizontal analysis, ratio analysis, final recommendation,
and conclusions. Your paper needs to include a minimum of two scholarly resources in
addition to the textbook as references.Here is a breakdown of the sections within the body
of the assignment:Company OverviewProvide a brief overview of your company (one to two
paragraphs at most). What industry is it in? What are its main products or services? Who
are its competitors?Horizontal Analysis of Income Statement and Balance SheetPrepare a
three-year horizontal analysis of the income statement and balance sheet of your selected
company. Discuss the importance and meaning of horizontal analysis. Discuss both the
positive and negative trends presented in your company.Ratio AnalysisCalculate the current
ratio, quick ratio, cash to current liabilities ratio, over a two-year period. Discuss and
interpret the ratios that you calculated. Discuss potential liquidity issues based on your
calculations of the current and quick ratios. Are there any factors that could be erroneously
influencing the results of the ratios? Discuss liquidity issues of competitive companies
within the same industry.RecommendationBased on your analysis would you recommend
an individual invest in this company? What strengths do you see? What risks do you see? It
is perfectly acceptable to state that you would recommend avoiding this company as long as
you provide support for your position.Writing the Final Paper1. Must be five to seven
double-spaced pages in length, and formatted according to APA style as outlined in the
Ashford Writing Center.2. Must include a title page with the following:a. Title of paperb.

3. Student's namec. Course name and numberd. Instructor's namee. Date submitted3. Must
begin with an introductory paragraph that has a succinct thesis statement.4. Must address
the topic of the paper with critical thought.5. Must end with a conclusion that reaffirms your
thesis.6. Must document all sources in APA style, as outlined in the Ashford Writing
Center.7. Must include a separate reference page, formatted according to APA style as
outlined in the Ashford Writing Center.