Financial and Managerial Accounting
Assignment 1
Financial Statement Analysis
Learning Objectives for Course
1. Acquire a comprehensive understanding of the principles used to prepare and
present financial statements.
2. Relevant application of knowledge to read and understand financial statements
and to observe the effects of routine business transactions on them.
3. Develop quantitative skills necessary to read, interpret and perform the
calculations for the accounting reports involved in cost control and profit
planning.
4. Evaluate and identify financial strengths and weaknesses of a business through
appropriate conceptual analysis.
5. Analyse information and knowledge effectively in order to develop meaning to
solve complex problems and make decisions ;
Guidelines for assignment
? This is an individual assignment
? Ground your answer in relevant theory
? Plagiarism and reproduction of someone else’s work as your own will be
penalized
? Make use of references, where appropriate – Use Harvard or APA referencing
method.
? Late submission are not accepted
? Structural elements should include an introduction, main body, and a conclusion
? Word count guidance : part 1 – N/A. Business report wordage should be 2000
+/10%
? Type of assignment: Excel Assessed Work Folder and Business Report
? Learning Outcome Assessed: 1,2,3,4
? Submit one single document and not lots of different files.
Part 1 – Financial Analysis
The condensed financial statements of Soule Company for the years 2013 and 2014
are presented below.
Soule Company
Balance Sheets
December 31
2014 2013
Current assets
Cash and cash equivalents
Accounts receivable (net)
Inventory
Prepaid expenses
Total current assets
Property, plant, and equipment
Investments
Intangibles and other assets
Total assets
Current liabilities
Long-term liabilities
Stockholders’ equity—common
Total liabilities and stockholders’ equity
£ 330 £ 360
470 433
430 390
120 160
1,350 1,343
420 380
10 10
530 510
£2,310 £2,243
£ 900 £ 810
390 393
1,020 1,040
£2,310 £2,243
Soule Company
Income Statements
For the Years Ended December 31
2014 2013
Sales revenue
Costs and expenses
Cost of goods sold
Selling and administrative expenses
Interest expense
Total costs and expenses
Income before income taxes
Income tax expense
Net income
Compute the following ratios for 2014 and 2013.
(a) Current ratio.
(b) Inventory turnover. (Inventory on 12/31/12 was £326.)
(c) Profit margin ratio.
(d) Return on assets. (Assets on 12/31/12 were £2,100.)
(e) Return on common stockholders’ equity. (Stockholders’ equity on 12/31/12 was
£960.)
(f) Debt to total assets ratio.
(g) Times interest earned.
Critically evaluate your ratio calculations and conclude on the current state of the
company.
Word count 500 (+/- 10%)
£4,000
£3,600
984 895
2,400 2,330
10 20
3,394 3,245
606 355
242 142
£ 364 £ 213
Part 2 – Performance Evaluation
Evaluate the financial performance of a company of your choosing using the knowledge
and technical skills that you have gained during the course so far. Provide a theoretical
explanation of any ratio analysis. No need to recalculate ratios, often the financial
reports provides these.
Attach the company financial statements as an appendix to your statement as reference
to your work.
Present your findings in a Management Business Report wordage should be 1500
+/10%.
