1. Prepare the following financial exhibits for 2013 through 2016 : - Ratio table - Vertical analysis of income statements and balance sheets - Horizontal analysis (index numbers) of income statements and balance sheets - Cash flow statements - 5-part analysis of ROE 2. Assuming the role of William Wyler, CPA, prepare a 2-page memorandum that analyzes the financial condition of PGI and makes recommendations relating to the company's financial performance and proposed new product introduction. The memo should be divided into sections describing liquidity, asset management, long-term debt paying ability, profitability, and recommendations. The memo should be single spaced and use the 12-point Calibri font with .7 inch margins. Submit both the Excel and Word files through the course Moodle site. Exhibit 1 Exhibit 2 Exhibit 3 Sales Analysis DY roows Exhibit 4 Industry Averages Operations In order to expand sales, PGl has kept its prices constant over the last five years for water turbines. Wind turbine prices were only increased in 2014, and only solar turbines had annual price increases. However, competitors have increased prices annually. It also offers its distributors terms of 2/10, net 30 , which vary from the industry standard of net 30 . Most distributors took advantage of these terms over the past five years. PGl designs and assembles its products in Canada, but sources its components globally. As a precautionary measure, to guard against supply interruptions caused by strikes, material shortages, and transportation delays, it stockpiles many of its key parts. Its accounts payable relate primarily to inventory purchases. Industry standard credit terms are 3/15, net 60 and most suppliers charge interest of 10 percent per annum on any overdue accounts. In order to remain competitive with low-wage countries, PGl invested heavily in factory automation, but has had difficulties with many of the complex systems. Breakdowns and software "bugs" are commonplace as most of the equipment was bought from a low-cost supplier, which has since gone bankrupt. Low educational standards also made training difficult and lowered production efficiency. It was thought automation would allow the company to reduce finished goods inventory though just-intime production, but the frequent breakdowns made it necessary to carry more stock. To accommodate company growth, PGI built a new corporate headquarters, R\&D facility and distribution centre in 2014. A number of existing buildings were considered, but a new facility in an expensive area of Toronto was constructed to increase the profile of the company. Retained earnings were insufficient to fund PGI' rapid growth, so large amounts of capital had to be raised externally - the company has yet to pay a dividend. Terms loans and mortgages were negotiated with five different banks to diversify its funding sources. PGI is listed on the Toronto and New York Stock Exchanges and has gone to the market in each of the past five years to sell equity. To avoid losing control, the three founding shareholders agreed to issue only non-voting common shares, but is appears the market has lost its appetite for this type of security. PGl maintains a $1,500,000 line of credit with Western Canadian Bank to finance seasonal variations in net working capital. The loan must be 200 percent secured by inventory and accounts receivable. Also, to comply with the different loan agreements, the current ratio must be kept above 2.5, the long-term debt to total capitalization below 40 percent, and the cash flow coverage ratio above 2.0. 1. Prepare the following financial exhibits for 2013 through 2016 : - Ratio table - Vertical analysis of income statements and balance sheets - Horizontal analysis (index numbers) of income statements and balance sheets - Cash flow statements - 5-part analysis of ROE 2. Assuming the role of William Wyler, CPA, prepare a 2-page memorandum that analyzes the financial condition of PGI and makes recommendations relating to the company's financial performance and proposed new product introduction. The memo should be divided into sections describing liquidity, asset management, long-term debt paying ability, profitability, and recommendations. The memo should be single spaced and use the 12-point Calibri font with .7 inch margins. Submit both the Excel and Word files through the course Moodle site. Exhibit 1 Exhibit 2 Exhibit 3 Sales Analysis DY roows Exhibit 4 Industry Averages Operations In order to expand sales, PGl has kept its prices constant over the last five years for water turbines. Wind turbine prices were only increased in 2014, and only solar turbines had annual price increases. However, competitors have increased prices annually. It also offers its distributors terms of 2/10, net 30 , which vary from the industry standard of net 30 . Most distributors took advantage of these terms over the past five years. PGl designs and assembles its products in Canada, but sources its components globally. As a precautionary measure, to guard against supply interruptions caused by strikes, material shortages, and transportation delays, it stockpiles many of its key parts. Its accounts payable relate primarily to inventory purchases. Industry standard credit terms are 3/15, net 60 and most suppliers charge interest of 10 percent per annum on any overdue accounts. In order to remain competitive with low-wage countries, PGl invested heavily in factory automation, but has had difficulties with many of the complex systems. Breakdowns and software "bugs" are commonplace as most of the equipment was bought from a low-cost supplier, which has since gone bankrupt. Low educational standards also made training difficult and lowered production efficiency. It was thought automation would allow the company to reduce finished goods inventory though just-intime production, but the frequent breakdowns made it necessary to carry more stock. To accommodate company growth, PGI built a new corporate headquarters, R\&D facility and distribution centre in 2014. A number of existing buildings were considered, but a new facility in an expensive area of Toronto was constructed to increase the profile of the company. Retained earnings were insufficient to fund PGI' rapid growth, so large amounts of capital had to be raised externally - the company has yet to pay a dividend. Terms loans and mortgages were negotiated with five different banks to diversify its funding sources. PGI is listed on the Toronto and New York Stock Exchanges and has gone to the market in each of the past five years to sell equity. To avoid losing control, the three founding shareholders agreed to issue only non-voting common shares, but is appears the market has lost its appetite for this type of security. PGl maintains a $1,500,000 line of credit with Western Canadian Bank to finance seasonal variations in net working capital. The loan must be 200 percent secured by inventory and accounts receivable. Also, to comply with the different loan agreements, the current ratio must be kept above 2.5, the long-term debt to total capitalization below 40 percent, and the cash flow coverage ratio above 2.0