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Artifact One: Financial Statements and Analysis

The first artifact that you will include in your portfolio is the comprehensive, professional report that you create for the board of directors of Chester, Inc.?a large

publicly traded client at S.N.H.U., LLC. The report should contain your findings with the financial statements package as an appendix (Excel attachment).

Incorporate the feedback that you receive from your instructor during the development of this artifact.

? Income statement

? Balance sheet

? Statement of retained earnings

? Statement of cash flows (indirect method)

? Ratio analysis

o Liquidity - minimum of three key ratios with supporting calculations with a minimum of three years of data

o Profitability - minimum of three key ratios with supporting calculations with a minimum of three years of data

o Solvency - minimum of three key ratios with supporting calculations with a minimum of three years of data

? Vertical and horizontal analysis

o Both vertical and horizontal for the income statement with a minimum of three years of data

o Both vertical and horizontal for the balance sheet with a minimum of three years of data

Report of Findings and Recommendations: The report is the key section of this artifact and will be written after you complete the analysis in the sections in the

appendix above. The report will demonstrate your understanding of financial statements, what they contain, what they mean, and how they are used in strategic

decision making.

As you know, numbers are useless if we do not know what they mean and how to use them. The financial statements, ratios, and vertical/horizontal analysis

should be analyzed and interpreted in order to assess and explain the performance of the organization. In your report, you must:

? Address all three key ratios in each ratio category. Include what each ratio indicates and how the organization performed against its key competitor and

industry averages.

? Address all key findings in the vertical and horizontal analysis of the income statement and balance sheet. As a general rule, anything over 10% warrants

addressing.

Chester, Inc. Trial Balances for years ending December 31, 2013, 2014 and 2015 Account Description Cash on Hand Checking Account - Operating MMKT Accounts Investments - Trading Accounts Receivable Allowance for Doubtful Accounts Other Receivables Inventory Reserve for Inventory Obsolescence Prepaid Insurance Prepaid Rent Office Supplies Land Buildings and Land Improvements Machinery, Equipment, Office Furniture Accum. Depreciation Other Noncurrent Assets Accounts Payable Wages Payable FICA Employee Withholding Medicare Withholding Federal Payroll Taxes Payable State Payroll Taxes Payable FICA Employer Withholding Medicare Employer Withholding Income Taxes Receivable/Payable Line of Credit Current Portion LT Note Payable Interest payable Bonuses payable Dividend payable Long-Term Note Payable Common Stock Paid-in Capital Retained Earnings (Beginning Balance) Dividends Sales Sales Returns Income from Investments Unrealized (Gains) and Losses - Investments Interest Income Cost of Goods Sold Administrative Wages Expense Advertising Expense Auto Expenses Bad Debt Expense Bonus Expense Depreciation Expense Freight Insurance Expense Legal and Professional Expense Maintenance Expense Miscellaneous Office Expense Payroll Tax Expense Pension/Profit-Sharing Plan Ex Phone Postal Property Tax Expense Rent or Lease Expense Research and Development Utilities Warehouse Salaries Warranty Expense Interest Expense Income Tax Expense - Federal Income Tax Expense - State Loss on Legal Settlement 2,013 $2,483 247,646 806,288 6,935,712 20,513,628 (1,578,525) 0 23,531,507 (3,765,000) 1,829,143 250,000 9,259 146,250 779,882 541,522 (205,000) 67,301 (8,934,591) (36,838) (1,648) (730) (7,541) (3,519) (1,648) (730) 0 (12,500,000) 0 0 0 (6,000,000) (10,131,250) (9,278,750) (2,773,900) 6,000,000 (307,716,148) 5,621,979 (665,079) 64,288 (255,379) 176,961,437 21,094,132 1,121,425 261,218 2,028,032 0 166,250 5,378,689 1,067,428 4,506,417 76,420 21,279 1,938,736 3,750,000 95,467 160,042 100,619 3,254,357 38,639,554 169,554 5,791,730 1,375,352 1,093,750 2,956,250 536,250 23,965,000 2014 2015 $2,459 252,858 983,161 6,850,198 56,472,091 (2,387,691) 1,400,000 75,351,471 (12,136,103) 2,830,474 9,565 131,040 698,775 3,280,589 (786,102) (19,488,866) (264,513) (9,452) (12,785) (132,256) (61,630) (9,452) (12,785) (3,205,440) (52,231,360) (677,640) (470,311) (504,000) (15,250,000) (12,762,360) (10,131,250) (9,278,750) ???? 15,250,000 (271,839,067) 12,432,247 (658,672) 85,514 (147,707) 161,029,981 18,344,399 1,161,276 235,763 5,875,403 504,000 581,102 4,749,095 1,045,085 11,037,039 96,020 27,803 1,767,149 3,696,000 57,911 87,140 110,252 1,370,273 532,425 170,765 5,848,120 1,297,104 3,373,056 14,142,240 2,503,200 - $2,511 243,892 1,205,563 6,978,923 49,042,528 (2,942,552) 1,200,000 65,990,780 (10,558,525) 2,667,722 9,182 131,040 833,775 3,280,589 (1,403,257) (12,850,648) (198,384) (7,089) (9,589) (99,192) (46,200) (7,089) (9,589) (6,011,540) (47,481,737) (721,480) (568,429) (459,000) (15,000,000) (12,040,880) ### (9,278,750) ???? 15,000,000 (288,876,206) 23,110,096 (549,387) (128,725) (142,168) 179,103,248 19,706,506 1,058,391 214,001 13,900,800 459,000 617,155 4,325,068 951,774 8,987,069 87,641 25,390 1,609,342 3,366,000 53,651 79,360 101,319 2,230,615 3,080,313 155,600 5,270,689 1,422,381 2,942,147 7,269,540 1,258,000 - Use this worksheet to prepare a Multi-step Income Statement to include EPS Check Figures: 2015 Net Income 2014 Gross Profit 2013 Total Expenses $ $ $ 8,311,390 98,376,839 90,996,701 Use this worksheet to complete a Statement of Retained Earnings Check Figures: 2015 Shareholders' Equity 2014 Shareholders' Equity 2013 Shareholders' Equity $ $ $ 21,171,325 27,859,935 22,624,851 Use this worksheet to complete a Classified Balance Sheet Check Figures: 2015 Total Current Assets 2014 Current Liabilities 2103 Total Assets $ $ $ 113,840,024 92,330,490 50,112,096 Use this Worksheet to complete a Statement of Cash Flows Check Figures: 2015 Net Cash from Operating Activities 2014 Net Cash from Investing Activities 2015 Net Increase (Decrease) in Cash $ $ $ 20,775,751 (2,575,449) 213,488 Complete a Horizontal and Vertical Analysis of the Balance Sheet in this worksheet. Complete a Horizontal and Vertical Analysis of the Income Statement in this worksheet. Calculate and Present at least three Liquidity, Solvency and Profitability Ratios in this Worksheet ACC 700 Milestone One Guidelines and Rubric The first milestone is a rough draft of the first artifact for your professional portfolio, financial statements and analysis. You will complete a set of financials as described in the appendix section of the prompt below for a fictitious company called Chester Inc. You will then submit a report of your findings and recommendations. This will be graded using the rubric at the end of this document and is an opportunity for you to organize your thoughts and receive feedback from your instructor for the final submission. You should note that the submission guidelines for this milestone are less demanding than those for the final submission. Once you have submitted this milestone and received feedback from your instructor, it is up to you to incorporate this feedback and complete the artifact by meeting the submission guidelines found in the Final Project Guidelines and Rubric document. Client One - Chester, Inc. (Financial Statements and Analysis) Chester, Inc. is a large, publicly traded client at S.N.H.U., LLC. Your task is to develop a comprehensive, professional report for the board of directors. To do this, you will use Chester, Inc.'s trial balance to compose comparative financial statements, analyze data, and interpret results. These financial statements must be in good form in accordance with Generally Accepted Accounting Principles (GAAP). Next, you will assess the performance of Chester, Inc. using the financial statements that you created, along with industry performance data and the financial statements of a competitor. In addition, Chester, Inc. is considering expanding into the global market. They would like you to highlight key areas of the financial statements you have prepared and identify how they would be reported differently if composed under International Financial Reporting Standards (IFRS) rather than GAAP. Background and Financial Information Chester, Inc. is a large, publicly traded client operating in athletic wear including clothing, shoes, and accessories. Direct competitors include Columbia Sportswear Company (COLM - NYSE) and Under Armour, Inc. (UA - NYSE). All of these companies operate in the textile-apparel clothing industry. Chester Inc. operates on a calendar year. Reference the Milestone One Chester Inc. Trial Balance spreadsheet for the past three years' financials (2013, 2014, and 2015). Additional information: Land with the land improvements were sold at book value (no gain or loss) in 2014. (Note: To evaluate the sale, use the following accounts: land, building and land improvements, and Other Noncurrent Assets) New equipment purchased with cash for $2,739,067 in 2014 New storage building purchased with cash for $135,000 in 2015 No investments have been sold or purchased in 2014 or 2015 There are currently 8,275,000 shares of common stock outstanding. No additional common stock has been sold or repurchased in any of the aforementioned years. Artifact One: Financial Statements and Analysis The first artifact that you will include in your portfolio is the comprehensive, professional report that you create for the board of directors of Chester, Inc.a large publicly traded client at S.N.H.U., LLC. The report should contain your findings with the financial statements package as an appendix (Excel attachment). Incorporate the feedback that you receive from your instructor during the development of this artifact. Appendix: These sections should be completed first, before you write your report. Use the proper format for each section in accordance with Generally Accepted Accounting Principles (GAAP) and note and explain differences under International Financial Reporting Standards (IFRS) where appropriate: Income statement Balance sheet Statement of retained earnings Statement of cash flows (indirect method) Ratio analysis o Liquidity - minimum of three key ratios with supporting calculations with a minimum of three years of data o Profitability - minimum of three key ratios with supporting calculations with a minimum of three years of data o Solvency - minimum of three key ratios with supporting calculations with a minimum of three years of data Vertical and horizontal analysis o Both vertical and horizontal for the income statement with a minimum of three years of data o Both vertical and horizontal for the balance sheet with a minimum of three years of data Report of Findings and Recommendations: The report is the key section of this artifact and will be written after you complete the analysis in the sections in the appendix above. The report will demonstrate your understanding of financial statements, what they contain, what they mean, and how they are used in strategic decision making. As you know, numbers are useless if we do not know what they mean and how to use them. The financial statements, ratios, and vertical/horizontal analysis should be analyzed and interpreted in order to assess and explain the performance of the organization. In your report, you must: Address all three key ratios in each ratio category. Include what each ratio indicates and how the organization performed against its key competitor and industry averages. Address all key findings in the vertical and horizontal analysis of the income statement and balance sheet. As a general rule, anything over 10% warrants addressing. Guidelines for Submission: All financial calculations should be complete. Your paper must be submitted as a four- to five-page Microsoft Word document with double spacing, 12-point Times New Roman font, one-inch margins, and two to three sources cited in APA format. Round all answers up to the nearest dollar value in any calculations. Note that this milestone is a rough draft and the submission guidelines are different for the final project. The final paper will be 8-10 pages in length with at least five sources. Refer to the guidelines for submission in the Final Project Guidelines and Rubric document. Critical Elements Income Statement Balance Sheet Statement of Retained Earnings Statement of Cash Flows Ratio Analysis Vertical and Horizontal Analysis Key Ratios Proficient (100%) Completes the income statement using the proper format for each section in accordance with Generally Accepted Accounting Principles (GAAP) and notes and explains differences under International Financial Reporting Standards (IFRS) where appropriate Completes the balance sheet using the proper format for each section in accordance with Generally Accepted Accounting Principles (GAAP) and notes and explains differences under International Financial Reporting Standards (IFRS) where appropriate Completes the statement of retained earnings using the proper format for each section in accordance with Generally Accepted Accounting Principles (GAAP) and notes and explains differences under International Financial Reporting Standards (IFRS) where appropriate Completes the statement of cash flows using the proper format for each section in accordance with Generally Accepted Accounting Principles (GAAP) and notes and explains differences under International Financial Reporting Standards (IFRS) where appropriate Performs a ratio analysis for liquidity, profitability, and solvency with a minimum of three years of data using the proper format for each section in accordance with Generally Accepted Accounting Principles (GAAP) and notes and explains differences under International Financial Reporting Standards (IFRS) where appropriate Performs a vertical and horizontal analysis of the income statement and balance sheet using the proper format for each section in accordance with Generally Accepted Accounting Principles (GAAP) and notes and explains differences under International Financial Reporting Standards (IFRS) where appropriate Addresses all three key ratios in each ratio category; includes what each ratio indicates and how the organization performed against its key competitor and industry averages Not Proficient (0%) Does not complete the income statement using the proper format for each section in accordance with Generally Accepted Accounting Principles (GAAP); differences under International Financial Reporting Standards (IFRS) are not noted or explained Value 5 Does not complete the balance sheet using the proper format for each section in accordance with Generally Accepted Accounting Principles (GAAP); differences under International Financial Reporting Standards (IFRS) are not noted or explained 10 Does not complete the statement of retained earnings using the proper format for each section in accordance with Generally Accepted Accounting Principles (GAAP); differences under International Financial Reporting Standards (IFRS) are not noted or explained Does not complete the statement of cash flows using the proper format for each section in accordance with Generally Accepted Accounting Principles (GAAP); differences under International Financial Reporting Standards (IFRS) are not noted or explained 10 Does not perform a ratio analysis for liquidity, profitability, and solvency with a minimum of three years of data using the proper format for each section in accordance with Generally Accepted Accounting Principles (GAAP); differences under International Financial Reporting Standards (IFRS) are not noted or explained 10 Does not perform a vertical and horizontal analysis of the income statement and balance sheet using the proper format for each section in accordance with Generally Accepted Accounting Principles (GAAP); differences under International Financial Reporting Standards (IFRS) are not noted or explained 10 Does not address all three key ratios in each ratio category or include what each ratio indicates and how the organization performed against its key competitor and industry averages 20 10 Vertical and Horizontal Analysis Articulation of Response Addresses all key findings in the vertical and horizontal analysis of the income statement and balance sheet Submission has no major errors related to citations, grammar, spelling, syntax, or organization Does not address all key findings in the vertical and horizontal analysis of the income statement and balance sheet Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas Earned Total 20 5 100%