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Financial Statement Analysis Project

(This project is valued at 5% of the final grade.)

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. (see “BabyCakes_Financial_Project_Data.xls” linked in the lesson activities) , complete the following tasks.

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

  • Complete the calculations for the 19 items listed below.

Determine the following measures for the year 2008:

  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
  • Explain what the result of each measure indicates about the company.
  • Complete a horizontalanalysis for the Income Statement, and explain                               your findings.
  • Complete a vertical analysis for the Income Statement, and explain your                          findings.
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