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Actg 212 Principles of Accounting Ii Financial Analysis Project

  • Date Submitted: 08/17/2016 11:25 PM
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ACTG 212 Principles of Accounting II Financial Analysis Project  

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Michael Masterson has brought you a set of financial statements of a company that he is considering investing in as a long-term investment. He is asking for your help in determining if the company would be a good investment for him.
Using the attached financial statements, you need to create a vertical analysis as percentage of Total Assets for the Balance Sheet and as a percentage of Sales for the Income Statement, as well as a horizontal analysis of the Balance Sheet and Income Statement. Complete this for both years. In addition to the vertical and horizontal analysis, you need to calculate the following ratios:
Liquidity & Efficiency:
• Current Ratio
• Acid-Test Ratio
• Receivables Turnover & Days’ Sales Uncollected
• Inventory Turnover & Days’ sales in Inventory
Solvency
• Debt Ratio
• Equity Ratio
• Debt to Equity Ratio
Profitability
• Profit Margin Ratio
• Gross Margin Ratio
• Return on Total Assets (ROA)
• Return on Equity (ROE)
This information then needs to be incorporated into a written memo to Michael Masterson. Be sure to include the following information in your memo.
Introductory Paragraph – This paragraph will be an introduction to your analysis. In this paragraph, explain the importance of analyzing financial statements before investing in a company. Be sure to answer the following questions in your introduction:
1. What is the purpose of creating a vertical analysis and why is it useful in analyzing a potential investment?
2. What is the purpose of creating a horizontal analysis and why is it useful in analyzing a potential investment?
3. Overall, what do each of the three sections of ratios (Profitability, Liquidity & Solvency) tell a person about a company?
Financial Analysis Section – In this section, you will share the results of your...

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