Diamond Gem Case Study

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The Diamond Gem Cleaning and Maintenance Service Company is a cleaning and maintenance company who primarily services commercial buildings. It has $5,146,862 in annual sales and with contract costs of $4,532,519. They have a gross profit of $614,333. Since gross profit equals revenue minus costs, the contract costs can be found by subtracting gross profit from revenue: $5,146,862-$614,333=$4,532,519.
The contract costs are the direct costs associated to with the cleaning service. They include such items as cleaning chemicals and wages to the cleaning employees. The contract cost is an important number because it allows you to figure out your profit. Without knowing your costs, it will be impossible to know if your company is making a profit
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Total assets is the sum of current assets plus long term assets. To find Equipment, which is a long term asset, we can simply subtract current assets from total assets: $1,180,660-$893,868=$286,792. Equipment is in long term assets because it can not be easily converted to cash. Total assets represents all the assets the company has to use to try and generate revenue. The company 's effectiveness using these assets can be calculated using the return on assets. Return on assets is the net income as a percentage of the total assets: $150,767/$1,180,660=13%. For every dollar of assets, Diamond Gem generates $.13 of net income or a 13% …show more content…
Stockholders equity is made up of common stock, additional paid-in capital and the company 's retained earnings. There are two ways to find retained earnings. If we only have the balance sheet available, we can subtract the sum of all other stockholder’s equity from the total stockholders equity: $436,496-$125,862=$310,634. Retained earnings can also be found at the bottom of the income sheet as the sum of beginning retained earnings and net income: $159,867+$150,767=$310,634. Retained earnings is an important number because it shows how much capital is available to the company to continue and expand operations. A company with too little retained earnings may have slower

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