Finance date of Adams Stores, Inc. for the year ending 2016 and 2017.

Items		2016	2017
Sales		$3,432,000	$5,834,400
Cash		9,000	7,282
Other Expenses		340,000	720,000
Retained Earnings		203,768	97,632
Long-term debt		323,432	1,000,000
Cost of goods sold		2,864,000	4,980,000
Depreciation		18,900	116,960
Short-term investments		48,600	20,000
Fixed Assets		491,000	1,202,950
Interest Expenses		62,500	176,000
Shares outstanding (par value = $46.00)		100,000	100,000
Market Price of stock		8.50	6
Accounts Receivable		351,200	632,160
Accounts payable		145,600	324,000
Inventory		715,200	1,287,360
Notes Payable		200,000	720,000
Accumulated Depreciation		146,200	263,160
Accruals		136,000	284,960
Dividend Paid				11,000
Tax Rate Instructions:	40%			40%

As a group, complete the following activities using the financial information above:

Part 1: Financial Statements

1. Prepare the income statement for 2016 and 2017. Include statement of retained earnings for 2017
2. Prepare the balance sheet for 2016 and 2017
3. Prepare Common-Size financial statements of income statement and balance sheet.

4. Prepare Statement of Cash Flows

Part 2: Financial Statement Analysis

1. Based on your financial statements (from Part 1), calculate the following ratios for the two years. Show all your calculations in good form. Show your formulas. If you use excel, each calculation need to show the excel formula

Current ratio Quick ratio

Inventory turnover (times) Average collection period (days) Total asset turnover (times) Debt ratio

Times interest earned Gross profit margin Net profit margin Return on total assets Return on equity

P/E ratio

Return on equity using DuPont Analysis

2. Comments on the ratios by comparing 2016 to 2017 ratios.

3. Assume Adams Stores, Inc. is a retail company similar to WalMart, Myers, or Target. Compare 2017 ratios to the industry average. Please note that Adams Stores, Inc. is not a real company. To find comparable industry ratios, you need to search for industry ratios for retail. See information on Moodle for instructions on how to find industry ratios. Based on the industry average, how is Adams Stores, Inc. doing financially?

Part 3: Break-even, Financial and Operating Leverages

Johnson Products, Inc.
Income Statement
For the Year Ended December 31, 2018
Sales (40,000 bags at $50 each) ..................................	$2,000,000
Less: Variable costs (40,000 bags at $25)................	1,000,000
Fixed costs..............................................................	600,000
Earnings before interest and taxes ..............................	400,000
Interest expense ...........................................................	120,000
Earnings before taxes .................................................	280,000
Income tax expense (20%) ..........................................	56,000
Net income ..................................................................	$ 224,000

Based on the information above, calculate (show all calculations and responses in good form):

1. Break-even in units (in dollars and units). Explain what your numbers mean. As a manager, how would you use the numbers in financial planning?

2. What is the degree of financial leverage? Explain what your number mean. As a manager, how would you use the numbers in financial planning?

3. What is the degree of operating leverage? Explain what your number mean. As a manager, how would you use the numbers in financial planning?