Financial Management Assignment

Please see two part Financial Management assignment attached. Each assignment must be on two separate word documents. This assignment is due tomorrow, 1/9/18 at 1pm EST.   

Part 1

Discuss the importance of quality in a firm’s financial statements and how you would go about evaluating the quality of a firm’s financial statement. What do you consider to be the four main pro forma financial statements to financial forecasting, and why? List All references.

Part 2

Solve the problem below, calculate the ratios, interpret the results against the industry average, and fill in the table on the worksheet. Then, provide an analysis of how those results can be used by the business to improve its performance. 

Balance Sheet as of December 31, 2010

Gary and Company

Cash  

$45

Accounts payables  

$45

Receivables    

66

Notes payables 

45

Inventory

159

Other current liabilities 

21

Marketable securities

33

Total   current liabilities

$111

Total   current assets 

$303

Net fixed assets  

147

Long   Term Liabilities

Total   Assets  

$450

Long-term debt  

24

Total   Liabilities 

$135

Owners   Equity

Common stock

$114

Retained earnings

201

Total stockholders’ equity

315

Total   liabilities and equity

$450

Income Statement Year 2010

Net sales

$795

Cost of goods sold 

660

Gross   profit  

135

Selling expenses  

73.5

Depreciation

12

EBIT

49.5

Interest expense  

4.5

EBT

45

Taxes (40%)  

18

Net   income

27

1. Calculate the following ratios AND interpret the result against the industry average:

Ratio

Your Answer

Industry Average

Your Interpretation
(Good-Fair-Low-Poor)

Profit   margin on sales

3%

Return   on assets

9%

Receivable   turnover

16X

Inventory   turnover

10X

Fixed   asset turnover

2X

Total   asset turnover

3X

Current   ratio

2X

Quick   ratio

1.5X

Times   interest earned

7X

2. Analysis:

Give your interpretation of what the ratios calculations show and how the business can use this information to improve its performance. Justify all answers. List all references.