Reference no: EM131783125

1. The following information was obtained from the records of MCM Industries:

    December 31, 2012 December 31, 2011

Accounts Payable	$ 79,000	$ 69,200
Accounts Receivable	325,000	332,200
Building, Furniture and fixtures, net	1,161,000	1,161,000
Cash	$ 165,000	$ 188,000
Common stock	1,140,332	1,248,000
Cost of goods sold	13,823,440	12,533,300
General and Adm. expense	2,682,000	2,314,000
Income tax expense	994,000	1,337,000
Interest expense	29,000	38,000
Inventory	1,095,000	1,064,000
Long-term debt	211,000	256,000
Long Term Notes Payable	85,000	110,000
Other current assets	162,000	165,000
Other accrued payables	18,000	16,000
Retained earnings	1,374,668	1,211,000
Sales	$ 20,632,000	$ 19,282,000
Selling expense	640,000	578,000

Required:

1. Prepare an Income Statement and a Balance Sheet for MCM Corporation for 2011 and 2012.

2. Prepare a vertical analysis of the Balance Sheet and Income Statement for 2011 and 2012. Note any areas of concern and suggested actions management may need to take to address the areas of concern.

3. Compute the following ratios for both years:

• Current ratio
• Quick ratio
• Inventory Turnover ratio
• Debt to equity ratio
• Times interest earned
• Return on equity
• Gross margin percentage

4. Industry Comparison - Compare the performance of MCM Industries to the 2012 industry ratios below and identify differences between the ratios of MCM and the industry averages. Include any explanation on why a ratio may be higher or lower than the Page 1 of 2 industry average. You should also include any actions management needs to take to bring the ratios of MCM more in line with the industry averages.
Industry average ratios:

• Current ratio 5.8 to 1
• Quick (Acid) ratio 4.0 to 1
• Inventory turnover 6.2 times
• Debt to equity ratio .68 to 1
• Time Interest Earned 70.4 times
• Return on Equity 68%
• Gross Margin Percentage 45%