Baileys Limited Essay

768 words - 4 pages

Advanced Accounting Assignment.
Financial Report.

1. Prepare the Vertical Analysis of the Income Statement for each Company
Income statement | Bailey Ltd. | % | Snoopy Ltd. | % | Differentiate | % |
sales | 2797000 | 100.00 | 2454000 | 100 | 343000 | 0.00 |
COGS | 1790000 | 64.00 | 1594000 | 64.96 | 196000 | -0.96 |
gross margin | 1007000 | 36.00 | 860000 | 35.04 | 147000 | 0.96 |
operating expenses | 807000 | 28.85 | 663000 | 27.02 | 144000 | 1.84 |
operating incomes | 200000 | 7.15 | 197000 | 8.03 | 3000 | -0.88 |
interest expense | 70000 | 2.50 | 43000 | 1.75 | 27000 | 0.75 |
income before income tax | 130000 | 4.65 | 154000 | 6.28 | -24000 | -1.63 |
income tax ...view middle of the document...

| Snoopy Ltd. |
1. Profitable Ratios | | |
Gross Profit Margin = (Revenue-COGS)/Revenue | 0.36 | 0.35 |
Net Income Margin= Net Income /Revenue | 2.79 | 3.75 |
EBITDA = Net Income + Interest + Tax + Depreciation +Amortization | 200000 | 197000 |
EBITDA Margin = EBITDA/Revenue | 0.07 | 0.08 |
Interest Coverage Ratio = EBITDA / Interest Expense | 2.86 | 4.58 |
Return on Equity = Net Income/Average Owners Equity | 0.07 | 0.08 |
Return on Assets = Net Income/Average Assets | 0.07 | 0.08 |
Asset Turnover Ratio = Revenue/average total assets | 2.33 | 2.21 |
2. Liquidity Ratios: | | |
Working Capital= Current Assets minus Current Liabilities | 372000 | 627000 |
Current Ratio = Current Assets / Current Liabilities | 1.45 | 2.30 |
Quick Ratio = (Cash + Short Term Investments + Net accounts Receivable) / Current Liabilities (1:1) | 1.67 | 1.71 |
Debt to Equity = Total Liabilities / Shareholders' Equity | 68.95 | 43.51 |
DOS= (365 *Average Accounts Receivable)/Credit Sales | 31.45 | 38.97 |
ART = Credit Sales/Average Accounts Receivable | 11.61 | 9.37 |
Inventory Days on Hand= (Average Inventory * 365)/COGS | 17.74 | 25.19 |

3. Based on your comparative findings above, discuss your conclusions and recommendations.
Profitable Standpoint
Gross profit margin: Bailey Ltd’s ratio is 2.8%, and Snoopy Ltd’s ratio is 3.8%, this...

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