2024 – Understanding Financial Ratios in a Case Study Financial plans and statements are an important part

Understanding Financial Ratios in a Case Study

Financial plans and statements are an important part of identifying how much money is needed, and of determining the health of the company through company valuation. Completing financial statements is part of the role of the entrepreneur in raising capital.

Reread “All Is Not Paradise in Eden’s Garden,” parts 1 and 2,( Attached below) in files found at the end of subsection LO 4 of this week’s chapter of your text.

Assume the role of Shelly Edison (the accountant) and calculate the following ratios. Using the financial statements for Eden’s Garden, calculate the following ratios:

• Current Ratio
• Quick Ratio
• Debt Ratio
• Times Interest Turnover Ratio
• Average Inventory Turnover
• Average Collection Period
• Average collection period in days
• Average Payable Period
• Average payable period in days
• Net Sales to Net Assets
• Net Sales to Working Capital
• Net Profit on Sales
• Net Profit on Equity

What recommendations can you make to Eden’s to improve their company’s financial performance in the future?

Your paper should be 3-5 pages in length and conform to the APA Style with in text citations. Calculations of the ratios should be shown in an appendix (Xcel spreadsheets would work as well) in APA format while the body of the paper is used for explanations and recommendations.

 

 

428    SECTION III • LAUNCHING THE BUSINESS

^–_4/al You Be the Consviltanit

All Is Not Paradise in Eden’s Garden: Part 1

 

 

Cash		$6,457
Accounts Receivable	$29,152
Less Allowance for	$3,200	$25,952
Doubtful Accounts
Inventory		$88,157
Supplies		$7,514
Prepaid Expenses		$1,856
Total Current Assets		$129,936
Fixed Assets
Land		$59,150
Buildings	$51,027
Less Accumulated Depreciation	$2,061	$48,966
Autos	$24,671
Less Accumulated	$12,300	$12,371
Depreciation
Equipment	$22,375
Less Accumulated Depreciation	$1,250	$21,125
Furniture and Fixtures	$10,295
Less Accumulated Depreciation	$1,000	$9,295
Total Fixed Assets		$150,907
Intangibles (Goodwill)		$0
Total Assets		$280,843
Liabilities
Current Liabilities
Accounts Payable		$54,258
Notes Payable		$20,150
Credit Line Payable		$8,118
Accrued Wages/Salaries Payable		$1,344
Accrued Interest Payable		$1,785
Accrued Taxes Payable		$1,967
Total Current Liabilities		$87,622
Long-Term Liabilities
Mortgage		$72,846
Note Payable		$47,000
Total Long-Term Liabilities		$119,846
Owner’s Equity
Sam Lloyd, Capital		$73,375
Total Liabilities and Owner’s   Income Statement, Eden’s Garden Net Sales Revenue*   $689,247 Cost of Goods Sold     Beginning Inventory, 1/1/xx $78,271   + Purchases $403,569   Goods available for Sale $481,840   – Ending Inventory, 12,31/xx $86,157   Cost of Goods Sold   $395,683 Gross Profit   $293,564 Operating Expenses     Advertising $22,150   Insurance $9,187   Depreciation     Building $26,705   Autos $7,895   Equipment $11,200   Salaries $116,541   Uniforms $4,018   Repairs and Maintenance $9,097   Travel $2,658   Entertainment $2,798   Total Operating Expenses   $212,249 General Expenses     Utilities $7,987   Telephone $2,753   Professional Fees $3,000   Postage $1,892   Payroll Taxes $11,589   Total General Expenses   $27,221 Other Expenses     Interest Expense $21,978   Bad check Expense $679   Miscellaneous expense $1,248   Total Other Expenses   $23,905 Total Expenses   $263,375 Net Income   $30,189   *Credit sales represented $289,484 of this total. year-end financial statements from their accountant. At their last meeting with their accountant, Shelley Edison, three months ago, the Edens had mentioned that they seemed to be having trouble paying their bills on time. “Some of our suppliers have threatened to put us on ‘credit hold,– said Joe.