Question:Financial Statement Analysis provides information that indicates how a company is performing.By comparing financial statements of different years, a manager can make informed decisions about investments, expenditures, and activities that impact revenues.

Directions: Read the chapter in the text titled "Financial Statement Analysis." Using the comparative financial statements for Baby Cakes International Inc. Complete the following tasks.

Note: The market price of BabyCakes Int'l, Inc. common stock was $20 on December 31, 2008.

Part A:Complete the 19 ratios listed below.

Determine the following measures for2008:

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 times interest charges earned

11. Number of times preferred dividends 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 stockholder's equity

16. Earnings per share on common stock

17. Price-earnings ratio

18. Dividends per share of common stock

19. Dividend yield

Part B:Explain what the results of each ratio indicate about the company.

Part C:Complete ahorizontalanalysisfor the Income Statement, andexplainyour findings.

Part D:Complete avertical analysisfor the Income Statement, andexplain your findings.

Baby Cakes International Inc Statement of Retained Earnings for the Years ended December 31, 2008 and 2007 Retained Earnings, January 1 Net income for year Total Dividends Paid Preferred Stock Common Stock Total Dividends Paid Retained Earnings December 31 December 31, 2008 December 31, 2007 $1,375,000 68,000 $1,443,000 $1,327,000 67,000 $1,394,000 $15,000 7,000 $22,000 $1,421,000 $12,000 7,000 $19,000 $1,375,000 Baby Cakes International Inc Income Statement for the Years ended December 31, 2008 and 2007 2008 Sales Sales returns Sales Allowances Sales Discounts Net Sales Cost of Goods Sold Gross Profit Selling Expenses Administrative Expenses Total operating expenses Income from Operations Other income Other expense Income before Tax Income Tax Expense NET INCOME 2007 $1,055,000 1,000 1,500 2,500 $1,050,000 400,000 $650,000 $270,000 195,000 $465,000 $185,000 20,000 $205,000 96,000 $109,000 41,000 $966,000 3,000 1,000 2,000 $960,000 390,000 $570,000 $275,000 165,000 $440,000 $130,000 15,000 $145,000 48,000 $97,000 30,000 $68,000 $67,000 Baby Cakes International Inc Balance Sheet December 31, 2008 and 2007 ASSETS December 31, 2008 December 31, 2007 Current Assets Cash Securities A/R Inventory Prepaids Total Current Assets $165,000 398,000 199,000 84,000 25,000 $871,000 $126,000 254,000 165,000 52,000 18,000 $615,000 Long Term Investments Plant Property and Equipment (net of depreciation) 300,000 1,040,000 200,000 760,000 $2,211,000 $1,575,000 $290,000 $250,000 300,000 600,000 $900,000 $1,190,000 400,000 $400,000 $650,000 Preferred $6 stock, $100 par Common Stock, $10 par Retained Earnings Total Stockholder's Equity $250,000 350,000 1,421,000 $2,021,000 $200,000 350,000 1,375,000 $1,925,000 Total liabilities and stockholders' equity $3,211,000 $2,575,000 Total Assets LIABILITIES Accounts Payable Long Term Liabilities Mortgage note payable , 8% due 2011 Bonds Payable, 12% due 2015 Total Long-term liabilities Total Liabilities Stockholders' Equity