Competency 319 Case Study

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SUBDOMAIN 319.1 - ACCOUNTING & FINANCE
SUBDOMAIN 319.2 - INFORMATION TOOLS
Competency 319.1.2: Ratios - The graduate determines the financial condition of a firm using financial ratios and other financial data.
Competency 319.2.1: Technology Tools - The graduate uses information technology tools for specified business purposes.
Objectives:
319.1.2-04: Determine a firm’s financial condition by calculating and benchmarking specified ratios against other companies in the industry.
319.2.1-01: Use the Internet to gather information on a specified business topic.
319.2.1-02: Produce business letters or memorandums using a word processing application.
319.2.1-03: Develop a spreadsheet report that solves a business problem.
Introduction:
Company G operates a small chain of wholly owned home centers selling to consumers and contractors. Sales volume varies among the individual stores and ranges between $11 million and $20 million per year. The company is organized as a corporation and does not operate as a sub-chapter S corporation.
Given:
Consolidated financial statements for Company G are shown on the attached “Statement Analysis Template.”
• Sales volume shown is net sales.
• During Year 12 60% of net sales were on a credit basis.
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Task:
A. Calculate each of the thirteen indicated ratios for Year 11 indicated in the attached “Statement Analysis Template.” Complete the attached spreadsheet with this information.
B. Complete a horizontal analysis of the income statements using the attached spreadsheet with this information.
Note: Round the percentages to the nearest hundredth of a percent, i.e. 6.84%. Answers like 6.80% or rounded up to 7% are not acceptable.
C. Complete a horizontal analysis of the balance sheets using the attached spreadsheet with this information.
Note: Round the percentages to the nearest hundredth of a percent, i.e. 6.84%. Answers like 6.80% or rounded up to 7% are not acceptable.
D. Write a business memorandum to the CEO of Company G (suggested length of 2–3 pages) in which you:
1. Explain for each ratio and trend whether the ratio or trend indicates a strength of the company; a likely weakness, threat, or emerging problem; or a satisfactory condition that management should not view as a strength or

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