5. Acting as an accounting advisor to the firm, prepare a memo in which you analyze the financial statements you prepared in step two and prepare an analysis of the company's financial position. Identify two strengths and two weaknesses in the company. Make two recommendations to improve the company's financial position. Be specific in each of the recommendations and use the ratios to support your analysis. The company has a cred it policy of 1/10, n/30 and uses this as part of its evaluation. Industry average for receivables turnover is 30 days. Inventory turnover industry average is approximately 45 days. The length of the memo should be no more than one page. If there are any grammatical or spelling errors you will not receive credit for the memo. A C 1 2018 2019 Current ratio 2 2 1.375 Quick ratio 3 1.38461538 0.83333333 Acct. Rec. Turnover 4 7.5 Day Sales In receivable 6 Inventory turnover Day Sales in Inventory 5 328.767123 6.66666667 7 54.75 8 Working capital 9 Liabilities to Stockholders Equity 10 Earnings per share 130000 90000 0.46661881 0.76315789 0.40567951 2 11 12 Dynamic Drones Comparative Balance Sheet December 31, 2019 and 2018 2018 2019 Assets Current Assets 80,000 60,000 Cash 100,000 140,000 Accounts Receivable, Net $ 70,000 110,000 Merchandise Inventory 10,000 20,000 Prepaid Rent $ 260,000 330,000 Total Current Assets Property, Plant, and Equipment: 191,000 400,000 Equipment Less: Accumulated Depreciation - Equipment (42,400) $ (60,000) 340,000 148,600 Total Property, Plant, and Equlpment $ 408,600 $ 670,000 Total Assets Liabilities and Stockholders' Equity 2019 2018 Current Liabillities Accounts Payable $ 150,000 40,000 Unearned Revenue 40,000 50,000 Salaries Payable 40,000 30,000 Federal Income Taxes Payable $ 10,000 10,000 Total Current Liabilities 240,000 130,000 Long Term Liabilities Note Payable S 50,000 290,000 130,000 Total Liabilities Stockholders' Equity: $ 98,600 150,000 Common Stock, $10 Par 20,000 Paid-In Capital in Excess of Par $ 180,000 210,000 Retained Earnings 278,600 380,000 Total Stockholders' Equity $ 408,600 Total Liabilities and Stockholders' Equity 670,000 Dynamic Drones Comparative Statement of Income For the Years Ended December 31, 2019 and 2018 2018 2019 $600,000 900,000 Sales $ 420,000 $ 180,000 $ 600,000 $ 300,000 Cost of Goods Sold Gross Margin Operating Expenses: Salaries and Wages Expense $ 100,000 20,000 $ 100,000 $ 20,000 $ 20,000 $ 140,000 $ 160,000 Rent Expense Depreciation Expense Total Operating Expenses Income from Operations Gain on Sale of Equipment $ 10,000 $ 130,000 50,000 C 3,000 5,000 7,000 Interest Expense $ (5,000) (4,000) Increase (Decrease) in Operating Income $ 45,000 $ 156,000 54,600 Income before Taxes Federal Income Taxes 15,750 29,250 $ 101,400 Net Income SSs OCTETY Comparative Statement of Retained Earnings Dynamic Drones Comparative Statement of Retained Earnings For the Years Ended December 31, 2019 and 2018 2019 2018 $ 176,000 Retained Earnings, Beginning of $ 180,000 Year $ 101,400 29,250 Net Income 25,250 71,400 Less: Dividends $ 210,000 180,000 Retained Earnings, End of Year 1. Equipment with a cost of $11,000 on which depreciation has been recorded was sold for cash. Equipment was purchased using cash and a long-term note payable. 2. Stock was issued for cash. 3. Dividends were paid in cash