Let$$s make some decisions based on a brief financial statement & ratio analysis.

Using the information provided for ABC Company below, and considering the lecture

material from Week $6,$ along with any additional research you may conduct, please share

your thoughts on the company. Are they improving? Declining? Staying even? Be sure to

support your answers with facts.

I know that some of you have taken Financial Accounting, while others have not. That$$s ok$.$

I$$m not relying on the information from that class for this question. One thing to keep in

mind is that assets are things the company owns, liabilities are the debts it owes, and

equity belongs to the shareholders$/$owners$.$ ASSETS $=$ LIABILITIES $+$ OWNERS$$ EQUITY

I$$m sure that all of you will say that you need more information. I would, too! In this case,

two years is what we have to work with.

And please relax. I know this isn$$t an accounting class. I just want to test your critical

thinking skills.

ABC COMPANY

FINANCIAL STATEMENT FOR PERIODS

ENDING $12/31/23$ AND $12/31/24$

$202220232024$

Balance Sheet

Cash $92,00077,950110,990$

Accounts Receivable $132,000144,000145,500$

Inventory $165,000179,850170,235$

Total Current Assets $389,000401,800426,725$

Plant Equipment $625,000650,000$

Office Equipment $175,000175,000$

Accum Depr $(290,000)(330,000)$

Net Fixed Assets $510,000495,000$

Total Long Term Assets $510,000495,000$

Total Assets $911,800921,725$

Accounts Payable $147,200124,800$

Accrued Expenses $7,0006,000$

Total Current Liabilities $154,200130,800$

Note Payable $-1169,100159,100$

Note Payable $-278,00068,000$

Total Long Term Liabilities $247,100227,100$

Total Liabilities $401,300357,900$

Common Stock $320,000320,000$

Additional Paid In Capital $28,50028,500$

Retained Earnings $102,000162,000$

Current Earnings $60,00053,325$

Total Equity $510,500563,825$

Total Liabilities and Equity $911,800921,725$

balance sheet check$-$confirm

Assets$=$Liabilities$+$Equity $--$

$20232024$

Income Statement

Sales $($net$)750,000675,000$

COGS $495,000405,000$

Gross Profit$/$Margin $255,000270,000$

GP $\%34\mathrm{.}0\%40\mathrm{.}0\%$

Operating Expenses $175,000198,900$

Profit Before Tax $80,00071,100$

Taxes $20,00017,775$

Profit After Taxes $60,00053,325$

Ratio Analysis

$20232024$

Earnings Performance

Rate Earned on Net Sales $8\mathrm{.}00\%7\mathrm{.}90\%$

Efficiency Analysis

Accounts Receivable Turnover $5\mathrm{.}434\mathrm{.}66$

Average Days for Payment $($DSO$)67\mathrm{.}1678\mathrm{.}27$

Short$-$Term Financial Strength $($Working Capital$)$

Working Capital $247,600295,925$

Current Ratio $2\mathrm{.}613\mathrm{.}26$

Long$-$Term Financial Strength

Debt to Equity $0\mathrm{.}790\mathrm{.}63$

Cash Flow $14,050(33,040$