Task 1 solution needed

| August 31, 2017


Determine a firm’s financial condition by calculating and benchmarking specified ratios against other companies in the industry.

· Use the Internet to gather information on a specified business topic.

· Produce business letters or memorandums using a word processing application.

· Develop a spreadsheet report that solves a business problem.


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.


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.

• Inventory is stated at cost on a first-in, first-out basis.

• Depreciation expense totaled $1,875,000 for Year 12 and $1,644,000 for Year 11.

• Depreciation expense is not shown as a separate item on the income statements but

is included in store operating expense and general and administrative expense.

• Depreciable assets are depreciated using the straight-line method over the estimated

useful life of the assets.

? The market value for the company common stock at the end of Year 11 was

$3.50/share and at the end of Year 12 it was $5.75/share.

For this task, you will use financial statements and pertinent industry data to interpret

Company G’s financial condition. The required ratios have been calculated for Year 11 and

are shown on the attached “Statement Analysis Template.”

Ratios gathered from financial statements that were submitted to banks and other financing

institutions by a large number of home centers are also included on the template. The

industry ratios included on the template were generated from statements submitted by

stores with annual sales between $10 million and $24 million.

As you develop your response, you should consider Company G trends by comparing Year

12 ratios to the same ratios for Year 11, consider what is depicted by the horizontal

analysis, and benchmark Company G’s performance and condition by comparing Year 12

ratios with the same ratios for the home center industry.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


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 weakness.

2. Justify your identification of each ratio or trend as a strength, weakness, or

satisfactory condition.

3. Evaluate the Company G ratios and trends against the available ratios and trends for

the home center industry.

? Include the URL where you found the information you have entered on the


Note: Information on trends can be gathered through Internet research. Some suggested

websites are included in the Web Links section below. Please consider, however, that ratios

you find on the Internet are generally computed as of the current date so ratios on the task

might not match the numbers you see in your research. It is best to consider the data based

on the trends you see for the industry and how Company G is doing related to those trends.

E. When you use sources, include all in-text citations and references in APA format.

Note: For definitions of terms commonly used in the rubric, see the attached Rubric Terms.

Note: When using outside sources to support ideas and elements in a paper or project, the

submission MUST include APA formatted in-text citations with a corresponding reference list

for any direct quotes or paraphrasing. It is not necessary to list sources that were consulted

if they have not been quoted or paraphrased in the text of the paper or project.

Note: No more than a combined total of 30% of a submission can be directly quoted or

closely paraphrased from outside sources, even if cited correctly. Here are some helpful APA


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