Financial Statements

Answer all of the following questions/problems and submit them to your mentor in a Word document.

You should use a financial calculator and Excel to solve the problems.

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Remember: You must export your table(s) from Excel to Word before submitting your work. Consult the Course Calendar for due dates.

Note: You will be able to use a financial calculator for your midterm exam, but Excel will not be available

Discuss the importance of financial statements and how they are used by businesses.
What is the basic format of the income statement and what is the relevance of the basic categories?
Cash flows for an organization come from operating activities and investment activities. Discuss the importance of each to the organization.
The Happy Auto Shop has the following annual information:

Gross Sales




Net sales




Gross profit



What are the shop’s returns and allowances and cost of goods sold?

Construct a statement of financial position (balance sheet) for the Humperdink family using the following information:





Checking account




student loan balance




stocks and bonds




savings account












savings account




automobile loan balance




401K retirement account




furniture, clothing, jewelry




credit card balance




mortgage loan balance



What is the purpose of financial statement analysis? How do the three types of financial statement analysis differ from each other and when is each used?
Samantha Knight is applying for a small-business loan. She provides the bank with the following information:

cash in checking accounts




cash in savings




home market value




first mortgage on house




home equity loan limit




home equity loan




automobile market value




automobile loan outstanding




credit card debt



Calculate the debt-to-asset ratio.
Calculate the debt-to-equity ratio.
What percentage of Samantha’s assets is owned by others?
Given the profit loss (income statement) and balance sheet for Sam’s Sandwich Delivery (Table 4-8, page 121 of your textbook), answer the following:
Calculate the following ratios: current, quick, accounts receivable turnover, fixed asset turnover.
Using the inventory figure on the balance sheet as average inventory, calculate the inventory turnover ratio.
Calculate the debt-to-equity ratio, debt-to-total asset ratio, and operating profit margin ratio.
Perform a vertical analysis of the income statement.
Perform a vertical analysis of the balance sheet.
Based on your analysis, would you consider investing in Sam’s Sandwich Delivery? Get homework help here


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