Question 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 Zinc, 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 $319,400 14.000 2.500 121.500) 297,900 1155.000) *142,900 * Sales Revenue LESS: Sales Returns and Allowances Sales Discounts Net Sales Cost of goods Sold Gross Profit LESS: Expenses: Freight out Expense Advertising Expense Salaries and Wage Expense Utilities Expense Insurance Expense Depreciation Expense Net Income 4,000 22,000 72,000 3,300 3,600 11,000 (115.900) $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 *S49,000 *27,000 116.000) *$60,000 Bakers Inc. Statement of Financial Position As at Dec 31 Assets Property. Plant and Equipment Building Accumulated Depreciation-Building $160,100 135,000) "125,100 Current Assets Cash Accounts Receivable Inventory Prepaid Rent Total Assets 10,500 15,000 30,000 2.400 57.900 $183.000 Liabilities and Owners Equity Equity Share Capital 100,000 Retained Earnings 60,000 160,000 Long-term Liabilities Notes Payable 17,000 Current Liabilities Unearned Service Revenue Total Liabilities and Equity 6.000 $183,000 Instructions a. Compute the following ratios, stating what each ratio indicates about Baker Inc. i. Current Ratio it. Inventory Turnover (use Inventory instead of Avg. Inventory) iii. Gross Profit Rate iv. Profit Margin V. Debt to Total Assets