B G A H D E F Patel's Fabrics Ltd. Comparative Income Statements 2 2016 $ 2016% 2017 $ 2017% 2018 $ 2018% 3 4 5 6 Sales 7 COGS 8 Gross margin 9 Operating expenses 10 Operating income 11 Interest expense 12 Income before taxes 13 Income taxes (40%) 14 Net income 599,100 291,000 308,100 106,200 201,900 11,200 190,700 76,280 114,420 538,900 259,200 279,700 104,600 175, 100 10,500 164,600 65,840 98,760 508,100 234,300 273,800 104 100 169, 700 11,900 157 800 63, 120 94,680 15 2017% 2018 $ 2018% 20.500 94,300 56.000 4,600 175 400 540,300 715,700 16 Patel's Fabrics Ltd. 18 Comparative Balance Sheets 19 20 2016 $ 2016% 2017 $ 21 Assets 22 Cash 32,000 25,800 23 A/R (net) 126,860 127.000 24 Inventory 60,000 80.700 25 Prepaid expenses 11,000 10.000 26 Total current assets 229,860 243,500 27 Capital assets (net) 668,900 576.000 28 Total assets 898.760 819.500 29 30 Liabilities & Shareholders' Equity 31 Accounts payable 53, 120 81,200 32 Accrued expenses 11,000 12,240 33 Total current liabilities 64.120 93,440 34 Long-term debt 170,000 160,000 35 Total liabilities 234, 120 253,440 36 37 Common stock ($0.50 par value 6,000 6.000 38 Additional paid in capital 99,000 99.000 39 Retained earnings 559,640 461 060 40 Total equity 664,640 566 060 41 Total liabilities & equity 898,760 819,500 42 43 Closing Stock Price $ 38.00 $ 35.00 79.100 41,700 120.800 150,000 270 800 5.000 62.000 377.900 444.900 715.700 S B000 44 45. Required: 44 45 Required: 46 1. Prepare a horizontal analysis for all 3 years. Use %, not dollars. 47 What significant changes do you see? 48 2. Prepare common-size financial statements for all 3 years. What significant changes 49 do you see? 50 3. Assess Patel's liquidity by using liquidity ratios. Is the company's position 51 improving or deteriorating? Explain your answer 52 4. Assess Pippin's profitability by using profitability ratios. For ratios that require average balances 53 calculate them for 2017 & 2018 only. Assess's Patel's profitability using these ratios. 54 5. How does the stock market view Pippin's performance over thses three years? Explain the 55 basis for your answer. 56 6. After you have completed the above analysis, identify what you consider to be the three most significant 57 weaknesses in Patel's performance. 58 59 In order to pass this assignment, you must complete all parts of the assignment. 60