4 - Financial Statement Analysis (15 marks) Chef Z Inc. was approached by Bakers Inc. to provide an equity investment in their business. They want to expand their operations and are quite pleased with how Chef Z Inc. conducted the business affairs. They provide Chef Z Inc. with the following Financial Statements. You are required to complete the following financial ratios which will assist Chef Z Inc. in determining whether they would want to invest in Bakers Inc.: Bakers Inc. Income Statement For the year ended Dec. 31 Sales Revenue LESS: Sales Returns and Allowances Sales Discounts Net Sales $319,400 14,000 7,500 (21,500) 297,900 Cost of goods Sold (155,000) Gross Profit *142,900 LESS: Expenses: Freight out Expense 4,000 Advertising Expense 22,000 Salaries and Wage Expense 72,000 Utilities Expense 3,300 Insurance Expense 3,600 Depreciation Expense 11,000 (115,900) Net Income $27,000 Bakers Inc. Statement of Retained Earnings For the year ended Dec 31 Beginning Retained Earnings Add: Net Income Less: Dividends Ending Retained Earnings *$49,000 *27,000 *(16,000) *$60,000 Bakers Inc. Statement of Financial Position As at Dec 31 Assets Property, Plant and Equipment Building $160,100 Accumulated Depreciation-Building Current Assets Cash Accounts Receivable Inventory Prepaid Rent Total Assets (35,000) *125,100 Liabilities and Owners Equity Equity Share Capital Retained Earnings Long-term Liabilities Notes Payable Current Liabilities Unearned Service Revenue Total Liabilities and Equity 10,500 15,000 30,000 2,400 57,900 $183,000 100,000 60,000 160,000 17,000 6,000 $183,000 Instructions a. Compute the following ratios, stating what each ratio indicates about Baker Inc. i. Current Ratio ii. Inventory Turnover (use Inventory instead of Avg. Inventory) iii. Gross Profit Rate iv. Profit Margin v. Debt to Total Assets 3 Marks each END OF ASSIGNMENT