Any additional, non-textbook Reading Assignments will provide text access/location information below.
1.
Finance for Managers.(2012). Licensed under Creative Commons by-nc-sa 3.0. Download the
PDF version.
- ReadChapter 4 - Pages 27-57
- ReadChapter 15 - Pages 241-254
2.SEC.gov | Bankruptcy: What happens when public companies go bankrupt. (2009, February 3). Sec.Gov.https://www.sec.gov/reportspubs/investor-publications/investorpubsbankrupthtm.html
3.Bankruptcy. (2019). United States Courts.https://www.uscourts.gov/services-forms/bankruptcy
Written Assignment Submit a written paper which is 2-3 pages in length, exclusive of the reference page. Papers should be double spaced in Times New Roman font which is no greater than 12 points in size. The paper should cite at least one source independent of the textbook. Case Study Comic book sales have hit record highs due to the volume of comic book-based movies achieving great success. With each new movie and character announcement, collectors and investors feed off the speculation. Many collectors send their books for grading, certification, and encapsulation to protect their investments. The Exceptional Service Grading Company provides those services and wants to expand to assessing other publication formats, such as certifying large magazines and movie posters. What is the company’s financial position? Please refer to the income statement and balance sheet for the Exceptional Service Grading Company available here. Using the learning resources provided in the Reading Assignment, perform a financial ratio analysis of the company using the following ratios: · Gross profit margin · Current ratio · Debt ratio Locate two other ratios to calculate. Define them and explain their purpose and how they add value to your analysis. Select significant lines from the financial statements and provide an observation of their trends. For example, if the account is increasing or decreasing in value, what would that indicate? · Draw some conclusions based on your observations. For example: · Is there any viability for a new project? · Why do you think the assets of the company went up from 2017 to 2018? · What implications does this have? · What follow-up questions do you have to ask the company’s management? · Logically support your observations. Explain the limitations when using ratio analysis of financial statements. Submit a 2-3 page written paper following the APA format, exclusive of the title and reference pages. This means 2-3 body pages of the research, and include the title page and reference page. The Abstract is not required or needed. Papers should be double spaced in Times New Roman font and 12 point size. The paper should cite at least one other validated (peer-reviewed) source independent of the textbook. In this paper, please include the following: · Provide the correct values for the calculations · Explain your approach to the problem. · Support your approach with references, and execute your approach. · Provide an answer to the case study questions with a recommendation. Balance Sheet Balance Sheet items20182017 CURRENT ASSETS Cash456,500222,400Cash increase - due to no dividends paid in 2018 Receivables3,936,4003,320,000 Inventory89,800100,200 Other assets1,169,500934,300 Total current assets5,652,2004,576,900Current ratio 2017: Current ratio 2018: LONG TERM ASSETS Note Receivable380,600280,700Some additional debt acquired in 2018 Equipment (net of depreciation)975,0001,017,800 Total long term assets1,355,6001,298,500 TOTAL ASSETS7,007,8005,875,400 LIABILITIES AND STOCKHOLDERS' EQUITYDebt ratio 2017: Debt ratio 2018: CURRENT LIABILITIES Accounts payable2,783,1002,805,700 Note payable (current maturities)277,550272,550 Other accrued liabilities265,300214,600 Total current liabilities3,325,9503,292,850 LONG TERM LIABILITIES Notes payable (long term)454,800454,800 Long term accrued liabilities389,550320,250 Total long term liabilities844,350775,050 TOTAL LIABILITIES4,170,3004,067,900 STOCKHOLDERS' EQUITY Common stock450,000450,000 Retained Earnings2,687,5001,357,500 Total stockholders' equity3,137,5001,807,500 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY7,307,8005,875,400 Income Statement Income Statement items20182017Answers/Comments Service Contract Revenues9,200,0006,595,400Increase in contracts Service Contract Costs(6,503,100)(4,957,800) Gross Profit2,696,9001,637,600Gross profit margin 2017: Gross profit margin 2018: General and Administrative Expenses(896,000)(756,000) Operating Income1,800,900881,600Increase in profit - see above comment Gain on sale of equipment59,9007,700 Interest expense(69,500)(70,800) Other expense(9,600)(63,100) Income before taxes1,781,700755,400 Taxes(451,700)(300,900) Net Income1,330,000454,500Increase in net income from 2017-2018 Retained Earnings, Beginning Balance1,357,5001,053,000 2,687,5001,507,500 Less: Dividends paid0(150,000)No dividend paid in 2018 Retained Earnings, Ending Balance2,687,5001,357,500