Reference no: EM131799602

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Financial Analysis and Results (Case Study)

Global Requirements for Business Memo:

1. Maximum of up to five pages for each of the three companies listed below. (You can submit less than 5 pages for each of the companies below. Just note the maximum is 5 pages, there is no minimum number of pages for this assignment.) Therefore, there are three separate business memo required for this assignment.
2. 12 point font - Times New Roman
3. 1 inch maximum boarder
4. Read all of the instructions below before attempting these three problems.
5. Address the three business memos to the president and CFO of the company. You have creative rights to what you name the president and CFO of each company. Remember this is a business memo and not a letter.
6. You are acting in the role of the controller of the company.
7. For the non-business memo requirements, provide a word document or an excel spreadsheet with the answers. If you do not provide in your final document the supporting details for your answers, please provide a separate word document or an excel spreadsheet with your supporting details.This assignment will analyzing the financial statements of each company. Grading will also be focused on professional business tone of this memo. Spelling and grammar are important!Requirements for Financial Analysis and Results:

There are three separate companies analyzed in this case study. The first company problem requires you to complete a horizontal analysis on the Lindell Company. The second company problem requires you to complete a vertical analysis on the Kasay Company. The third company problem requires you to compute 19 financial measures on Bettacort, Inc.

First Component of the Financial Analysis and Results - Case Study (Lindell Company):

Requirements:

1. Prepare a comparative income statement with horizontal analysis for the two-year period, using 2014 as the base year. Round to one decimal place.
2. Write up to a 5 page business memo, comment on any significant relationship revealed by the horizontal analysis prepared in requirement 1.

Lindell Company
Comparative Income Statement
For the Years Ending December 31, 2015 and 2014
	2015	2014
Sales	$1,092,500	$950,000
Sales returns and allowances	57,500	50,000
Net Sales	$1,035,000	$900,000
Cost of goods sold	625,000	500,000
Gross Profit	$410,000	$400,000
Selling expenses	153,600	120,000
Administrative expenses	97,600	80,000
Total Operating expenses	$251,200	$200,000
Income from Operations	158,800	200,000
Other income	15,000	10,000
Income before income tax	173,800	210,000
Income tax expense	23,000	20,000
Net Income	150,800	190,000

Second Component of the Financial Analysis and Results - Case Study (Kasay Company):

Requirements:

1. Prepare a comparative income statement for the two-year period, presenting, an analysis of each item in relationship to net sales for each of the years. Round to one decimal place.
2. Write up to a 5 page business memo, comment on any significant relationship revealed by the vertical analysis prepared in requirement 1.

Kasay Company
Comparative Income Statement
For the Years Ending December 31, 2015 and 2014
	2015	2014
Sales	$ 922,500	$820,000
Sales returns and allowances	22,500	20,000
Net Sales	$ 900,000	$800,000
Cost of goods sold	360,000	340,000
Gross Profit	$540,000	$460,000
Selling expenses	216,000	176,000
Administrative expenses	81,000	72,000
Total Operating expenses	$297,000	$248,000
Income from Operations	243,000	212,000
Other income	135,000	92,000
Income before income tax	378,000	304,000
Income tax expense	270,000	240,000
Net Income	108,000	64,000

Third Component of the Financial Analysis and Results - Case Study (Bettancort Inc.):

Requirements: Note that the market price for a share of common stock of Bettancort is $20.00.

Determine the following measure for 2015, rounding to one decimal place:

1. Working capital
2. Current ratio
3. Quick ratio
4. Accounts receivable turnover
5. Number of days' sales in receivables
6. Inventory turnover
7. Number of days' sales in inventory
8. Ratio of Fixed assets to long-term liabilities
9. Ratio of liabilities to stockholders' equity
10. Number of items interest charges are earned
11. Number of times preferred dividends are earned
12. Ratio of net sales to assets
13. Rate earned on total assets
14. Rate earned on stockholders' equity
15. Rate earned on common stockholders' equity
16. Earnings per share on common stock
17. Price-earnings ratio
18. Dividends per share of common stock
19. Dividend yield
20. Write up to a 5 page business memo, comment on any significant relationship revealed by the vertical analysis prepared in requirement 1.

Bettancort Inc.
Comparative Retained Earnings Statement
For the Years Ending December 31, 2015 and 2014
	2015	2014
Retained earnings, January 1	$2,655,000	$2,400,000
Add net income for year	300,000	280,000
Total	$2,955,000	$2,680,000
Deduct Dividends
On preferred stock	15,000	15,000
On common stock	10,000	10,000
Total	$25,000	$25,000
Retained earnings, December 31	$2,930,000	$2,655,000

 

Bettancort Inc.
Comparative Income Statement
For the Years Ending December 31, 2015 and 2014
	2015	2014
Sales (all on account)	$1,212,000	$1,010,000
Sales returns and allowances	12,000	10,000
Net Sales	$1,200,000	$1,000,000
Cost of goods sold	500,000	475,000
Gross Profit	$ 700,000	$ 525,000
Selling expenses	240,000	200,000
Administrative expenses	180,000	150,000
Total Operating expenses	$ 420,000	$ 350,000
Income from Operations	280,000	175,000
Other income	266,000	390,000
Other expense (interest)	166,000	225,000
Income before income tax	380,000	340,000
Income tax expense	80,000	60,000
Net Income	$ 300,000	$ 280,000
Bettancort Inc.
Comparative Balance Sheet
December 31, 2015 and 2014
	December 31, 2015	December 31, 2014
Assets
Current Assets:
Cash	$ 450,000	$ 400,000
Marketable securities	300,000	260,000
Accounts receivable (net)	130,000	110,000
Inventories	67,000	58,000
Prepaid expenses	153,000	139,000
Total Current Assets	$1,100,000	$ 967,000
Long-Term Investments	2,350,000	2,200,000
Property, Plant, and Equipment (net)	1,320,000	1,188,000
Total Assets	$4,770,000	$4,355,000
Liabilities
Current liabilities	$ 440,000	$ 400,000
Long-term liabilities:
Mortgage note payable, 8%, due 2019	100,000	-0-
Bonds payable, 10%, due 2016	1,000,000	1,000,000
Total Long-Term liabilities	1,100,000	1,000,000
Total Liabilities	1,540,000	1,400,000
Stockholders' Equity
Preferred $0.75 stock, $10 par	200,000	200,000
Common Stock, $10 par	100,000	100,000
Retained Earnings	2,930,000	2,655,000
Total Stockholders' Equity	3,230,000	2,955,000
Total liabilities and stockholders' equity	$4,770,000	$4,355,000