AC499 Unit 9 Assignment Preparing Annual Report Documents For this 4-5 page project, you will create the (1) Financial Highlights, (2) Presidents Letter to the Stockholders and (3) Management Discussion and (4) Analysis reports that would be contained in a companys annual report. Companies normally issue these reports to the stockholders and other interested parties. These reports summarize the companys operating activities for the past year and plans for the future. There are many variations in the order and form for presenting the major sections of the annual report. These reports will be completed in Microsoft Word following APA format, and will require you to disclose your references. VERY IMPORTANT NOTE: For purposes of this Final Project, you will use the Financial Data and ratios for the Rainbow Paint Company. This data is found in Unit 4 and is the Review problem. That data includes a Comparative Balance Sheet, Income Statement, and Statement of retained Earnings. You were given an opportunity to complete 19 different ratios for the Practice Set. All of that information is available for inclusion in this Final Project. The Rainbow Paint Company financial data and ratios will offer a very broad opportunity to present a highly robust and detailed Annual Report. The Rainbow Paint Company data includes a full set of comparative financial statements for 2 years. Assignment checklist Financial Highlights Presidents Letter to the Stockholders Management Discussion and Analysis Rainbow Paint Co.s comparative financial statements for the years ending December 31, 2012 and 2011 are as follows. The market price of Rainbow Paint Co.s common stock was $25 on December 31, 2012, and $30 on December 31, 2011. Rainbow Paint Co. Comparative Income Statement For the Years Ended December 31, 2012 and 2011 2012 2011 Sales $ 5,125,000 $ 3,257,600 Sales returns and allowances 125,000 57,600 Net sales $ 5,000,000 $ 3,200,000 Cost of goods sold 3,400,000 2,080,000 Gross profit $ 1,600,000 $ 1,120,000 Selling expenses $ 650,000 $ 464,000 Administrative expenses 325,000 224,000 Total operating expenses $ 975,000 $ 688,000 Income from operations $ 625,000 $ 432,000 Other income 25,000 19,200 $ 650,000 $ 451,200 Other expense (interest) 105,000 64,000 Income before income tax $ 545,000 $ 387,200 Income tax expense 300,000 176,000 Net income $ 245,000 $ 211,200 Rainbow Paint Co. Comparative Retained Earnings Statement For the Years Ended December 31, 2012 and 2011 2012 2011 Retained earnings, January 1 $ 723,000 $ 581,800 Add net income for year 245,000 211,200 Total $ 968,000 $ 793,000 Deduct dividends: On preferred stock $ 40,000 $ 40,000 On common stock 45,000 30,000 Total $ 85,000 $ 70,000 Retained earnings, December 31 $ 883,000 $ 723,000 Rainbow Paint Co. Comparative Balance Sheet December 31, 2012 and 2011 Assets 2012 2011 Current assets: Cash $ 175,000 $ 125,000 Marketable securities 150,000 50,000 Accounts receivable (net) 425,000 325,000 Inventories 720,000 480,000 Prepaid expenses 30,000 20,000 Total current assets $ 1,500,000 $ 1,000,000 Long-term investments 250,000 225,000 Property, plant, and equipment (net) 2,093,000 1,948,000 Total assets $ 3,843,000 $ 3,173,000 Liabilities Current liabilities $ 750,000 $ 650,000 Long-term liabilities: Mortgage note payable, 10%, due 2015 $ 410,000 - Bonds payable, 8%, due 2018 800,000 $ 800,000 Total long-term liabilities $ 1,210,000 $ 800,000 Total liabilities $ 1,960,000 $ 1,450,000 Stockholders' Equity Preferred 8% stock, $100 par $ 500,000 $ 500,000 Common stock, $10 par 500,000 500,000 Retained earnings 883,000 723,000 Total stockholders' equity $ 1,883,000 $ 1,723,000 Total liabilities and stockholders' equity $ 3,843,000 $ 3,173,000 Instructions (Answers given to help with Determine the following measures for 2012: 1. Working capital : $1,500,000 $750,000=$750,000 2. Current ratio : $1,500,000 $750,000=2.0 3. Quick ratio : $750,000 $750,000=1.0 4. Accounts receivable turnover : $5,000,000 [($425,000 + $325,000) 2]= 13.3 5. Number of days' sales in receivables : $5,000,000 365 days = $13,699, $375,000 $13,699=27.4 days 6. Inventory turnover : $3,400,000 [($720,000 + $480,000) 2]= 5.7 7. Number of days' sales in inventory : $3,400,000 365 days = $9,315, $600,000 $9,315=64.4 days 8. Ratio of fixed assets to long-term liabilities : $2,093,000 $1,210,000=1.7 9. Ratio of liabilities to stockholders' equity : $1,960,000 $1,883,000=1.0 10. Number of times interest charges earned : ($545,000 + $105,000) $105,000=6.2 11. Number of times preferred dividends earned : $245,000 $40,000=6.1 12. Ratio of net sales to assets : $5,000,000 [($3,593,000 + $2,948,000) 2]= 1.5 13. Rate earned on total assets : ($245,000 + $105,000) [($3,843,000 + $3,173,000) 2]= 10.0% 14. Rate earned on stockholders' equity : $245,000 [($1,883,000 + $1,723,000) 2]= 13.6% 15. Rate earned on common stockholders' equity : ($245,000 $40,000) [($1,383,000 + $1,223,000) 2]= 15.7% 16. Earnings per share on common stock : ($245,000 $40,000) 50,000 shares=$4.10 17. Price-earnings ratio : $25 $4.10=6.1 18. Dividends per share of common stock : $45,000 50,000 shares=$0.90 19. Dividend yield : $0.90 $25=3.6%