A B D E F G H 1 You have just received a large annual bonus at work, and have decided to invest it in stocks for your retirement. You have been analyzing different stocks and have narrowed your choice to two possibilities. You can either invest in Amazing Company, or in EBUY. EBUY's ratios are given below. Select 3 ratios you might use to determine which stock to invest in and make a choice. Defend your selection with quality reasoning. The second part of your analysis is to read the article attached to this assignment. On pages 117-120, there is a chart that summarizes some of the differences between GAAP and IFRS. Explain the general similarities and differences, and discuss how interest expense would be presented on the Statement of Cash Flows. Include in your discussion any differences between GAAP and IFRS. Would that impact your 1 investment decision above? Your answer will be graded on analysis, logic, and writing skills. 2 3 Answers will vary EBUY Ratios: Debt-to Equity Ratio 0.40 Current Working Ratio Capital 5.00 $ 300,000 4 5 6 Cash Ratio Debt Ratio 4.00 0.35 Days Days Sales Accounts Sales in Inventory in Gross Profit Receivable Receiva Turnover Inventory Percentage Turnover bles 7.25 50.34 48% 7.50 48.67 7 8 9 Rate of Return on Total Assets 8% Asset Turnover Ratio 1.50 Rate of Return on Stockholde Earnings rs' Equity Per Share 15% 15.40 10 11 12 Price/ Earnings Ratio 14.50 Dividend Yield Dividend Payout 12% 2.00% 13 14 15 16 16 17 18 19 20 21 22 A B G K M N 5 16 1 ACCT 2023 PROJECT 1 2 Amazing Company began operations on January 1, 2015, and is now in its fourth year of operations. It is a retail sales company with a large amount of online sales. 3 The adjusted trial balance as of December 31, 2019 appears below, along with prior year balance sheet data and some additional transaction data for 2018. 4 AMAZING COMPANY 6 Adjusted Trial Balance 7 7 12/31/2019 8 2019 2018 9 Account Title Adjusted Trial Balance ost-Closing Trial Balang 10 Debit Credit Debit Credit 11 Cash $ 120,000 125,600 12 Accounts Receivable 55,000 35,000 13 Prepaid Insurance 5,000 6,000 14 Inventory 46,000 15,600 15 Office Equipment 63,000 47,000 Machinery & Tools 59,000 21,000 17 Accumulated Depreciation $ 21,000 16,000 18 Accounts Payable 12,200 16.800 19 Salaries Payable 2,600 2,700 20 Sales Tax Payable 2,000 4,000 21 Note Payable-Long Term 31,000 22,100 22 Common Stock, $10 par 240,000 160,000 23 Retained Earnings 28,600 28,600 24 Dividends 10,000 25 Sales Revenue 240,000 26 Cost of Goods Sold 132,600 27 Rent Expense 20,000 28 Salaries Expense 36,000 29 Insurance Expense 11,800 30 Legal Fees 9,200 31 Depreciation Expense 5,000 32 Interest Expense 1,800 33 Income Tax Expense 3,000 34 $577,400 577,400 $250,200 250,200 35 36 37 Transaction Data for 2019 (Note, these transactions were included in the trial balance numbers above.) 38 Cash paid for purchase of office equipment $ 6,000 39 Cash paid for purchase of tools 10,000 40 Acquisition of Machinery with Notes Payable-Long-term 38,000 41 Long-Term Debt ? 42 Cash payment of dividends 10,000 43 Cash receipt from issuance of 10,000 shares of common stock 80,000 44 45 46 Requirements: (See sheet tabs at bottom. Use each sheet for the following requirements.) 47 Use Excel Skills in completing these requirements. You must use formulas and functions, cell references, and professional fo 48 1. Prepare the Amazing Company multi-step income statement for the year ended December 31, 2019. Include the EPS at the bottom. 49 Also include a vertical analysis column at the right and perform a vertical analysis of the income statement. (Use percentage format with 2 decimal places.) 50 2. Prepare the Amazing Company balance sheet for December 31, 2019. Include a vertical analysis column at the right 51 and perform a vertical analysis of the balance sheet. (Use the percentage format with 2 decimal places.) 52 3. Prepare the Amazing Company statement of cash flows for the year ended December 31, 2019. Use the indirect method and the format in your textbook. 53 4. Complete the analysis of the financial statements as directed on the Analysis sheet. 5. Complete the analyis of the investment options between this company and EBUY (ratios given). Also use the chart from the attached article, 54 and any other source to analyze the impact of using GAAP vs. IFRS> Write short response (15-30 sentences) on your analysis. 55 Q R B D E F H M N o 1 Using the information provided in the instructions and the financial statements you have created in the previous requirements, perform the following analysis (5 Requirement: 2 Current Ratio Working Capital Debt-to- Debt Ratio Equity Ratio Cash Ratio Requirement 1. 3 Compute these ratios: 4. Round ratios to two 4 5 5 decimal places or format as percentages or currency as appropriate. 6 7 Accounts Days Sales Inventory Days Sales in Gross Profit Receivable in Turnover Inventory Percentage Turnover Receivables 8 2018 Total Assets - Rate of Return on Total Assets Asset Turnover Ratio Rate of Return on Stockholders Earnings 'Equity Per Share 9 10 11 2018 SHE Price/ Earnings Ratio Dividend Yield Dividend Payout Dividend per share -Current Stock Price is 12 $10.00 per share 13 14 15 Requirement 2. Based on 16 the ratios computed above, 17 analyze the company's 18 ability to pay its debts (both 19 current and long term). 20 Refer to at least 3 specific 21 ratios in your analysis. 22 23 Requirement 3: Based on 24 the ratios computed above, - 25 analyze the company's 26 management of inventory. 27 Refer to at least 2 specific 28 ratios in your analysis. 29 30 31 Requirement 4: Based on 32 the ratios computed above, 33 analyze the company's 34 management of receivables. 35 Refer to at least 2 specific 36 ratios in your analysis. Instructions Income Statement Balance Sheet Stmt of Cash Flows Analysis Stock Investment Analysis + Ready Criteria Ratings Pts Accounting Accuracy 20 to >18.0 pts Proficient Financial statements and ratios are completely accurate AND all statements are in standard formats. (Deductions from 25- point max for minor format errors, rounding errors, etc.) 18 to >13.0 pts Competent Most of the financial statements and financial ratios are accurate AND financial statements are created in proper format with no more than one statement using non- standard format 13 to >0 pts Unsatisfactory None of the financial statements are completely accurate and most financial ratios are calculated incorrectly, OR some statement and ratio inaccuracies are present AND improper financial statement formats are used on 2 or more of the statements. 20 pts Excel Skills 10 to >8.0 pts Proficient Used Excel formulas/functions efficiently for ALL calculations AND effectively utilized Excel formatting features to create professional and attractive statements. 8 to >6.0 pts Competent Used Excel formulas/functions extensively, with no more than 3 calculations made manually AND effectively utilized Excel formatting features to create professional statements. 6 to >0 pts Unsatisfactory Did not use Excel formulas/functions for many calculations (more than 3) AND/OR did not utilize Excel formatting features effectively to create professional statements. 10 pts Ratio 10 to >8.0 pts Analysis Skills Proficient Exhibited sound reasoning and higher order thinking skills to deliver a complete analysis of the ratios 8 to >6.0 pts 6 to 0 pts Competent Unsatisfactory Exhibited sound reasoning overall Did not exhibit sound reasoning and delivered a reasonable analysis and higher order thinking skills in of the ratios, with no more than 1 analyzing ratios; three or more or 2 ratios analyzed incorrectly. ratios not analyzed correctly. 10 pts International Perspective 5 to >4.0 pts Proficient Exhibited sound reasoning and higher order thinking skills to analyze the IFRS perspective 4 to >3.0 pts Competent Exhibited sound reasoning overall and delivered a reasonable analysis of the IFRS perspective 3 to >0 pts Unsatisfactory Did not exhibit sound reasoning and higher order thinking skills in analyzing IFRS perspective 5 pts Business Writing 5 to >4.0 pts Proficient Used professional, college- level business writing skills to communicate analysis results. 4 to >3.0 pts Competent Used acceptable business writing skills to communicate analysis results. Few grammatical errors. No spelling errors. 3 to >0 pts Unsatisfactory Did not use proper business writing skills to communicate analysis results. 5 pts Did not exhibit college-level business writing skills