Financial Statement Analysis Fall 2017. Background: This assignment uses a company case study for financial statement analysis. Students are required to solve financial ratios and analyze these ratios using a time series trend. The students must identify strengths and weakness of the company and make recommendations to the manager of the company. Instructions: Part A: Use 2017 and 2016 comparative income statements and balance sheets for Blackwater Falls Company provided in the following tab. Calculate the following ratios for 2017: working capital current ratio quick ratio days sales receivable inventory turnover debt to equity times-interest-earned return on assets (ROA) earnings per share (EPS) price to earnings (PE) Note: All work must be completed in EXCEL using formulas for grading. (Answers submitted in Word or without formulas in Excel will receive a zero.) The question only specifically asks for 2017 ratios. However, in order to do a thorough analysis in part b you may need to compute 2016 ratios as well for comparisons when applicable. (There are some ratios that you will not be able to compute from the prior year because of a lack of data.) Part B: Write a professional memo addressed to Blackwaters management to discuss your evaluation of Blackwater's solvency and performance based on calculations from part A. (No bullet lists and/or incomplete sentences.) The memo should explain the significance of the specific ratios and address strengths and weakness of the company. Memos should be typed in Word and uploaded to Blackboard through the Assignment menu. Grading: Calculations in Part A should be well-organized in Excel by the three classifications noted: Short-term solvency, Long-term solvency and Performance (Profitability). Memos should be a minimum of 500 words. See the FSA Memo Grading Rubric attached for specific grading requirements. Due Date: Projects will be due by December 8th.Instructions: Comparative income statements and balance sheets for Blackwater Falls Company follow for 2017 and 2016. Blackwater Falls Company Comparative Income Statements December 31, 2017 and 2016 2017 2016 Sales $11,788,000 $11,252,000 Cost of goods sold $6,625,000 $6,405,000 Gross profit $5,163,000 $4,847,000 Selling and administrative expenses $3,576,000 $3,374,000 Operating income $1,587,000 $1,473,000 Other expenses (revenues) Interest revenue $(104,000) $(89,000) Interest expense $87,000 $80,000 Total other expenses (revenues) $(17,000) $(9,000) Income before income taxes $1,604,000 $1,482,000 Income taxes $722,000 $671,000 Net Income $882,000 $811,000 Blackwater Falls Company Comparative Balance Sheets For Years Ended December 31, 2017 and 2016 2017 2016 Assets Cash $252,000 $269,000 Marketable securities $447,000 $213,000 Accoutns receivable $977,000 $1,056,000 Inventory $1,611,000 $1,630,000 Prepaid expenses $135,000 $126,000 Total current assets $3,422,000 $3,294,000 Investments and other assets $785,000 $614,000 Property, plant, and equipment, net $2,829,000 $2,692,000 Trademarks and other intangibles $273,000 $291,000 Total assets $7,309,000 $6,891,000 Liabilities and stockholders' equity Notes payable $189,000 $185,000 Current maturities of long-term debt $20,000 $25,000 Accounts payable and accrued expenses $1,832,000 $1,943,000 Total current liabilities $2,041,000 $2,153,000 Long-term debt $666,000 $549,000 Total liabilities $2,707,000 $2,702,000 Common stock, $10 par value $135,000 $135,000 Additional paid-in capital $238,000 $236,000 Retained earnings $4,229,000 $3,818,000 Total stockholders' equity $4,602,000 $4,189,000 Total liabilities and stockholders' equity $7,309,000 $6,891,000 Additional Company Information Market value of common stock: $80 in 2017 and $70 in 2016 Credit terms: n/30 days 2016 Days Sales Receivable: 35 days 2016 Inventory Turnover: 3.6 times Industry Average for Inventory Turnover: 4 times Bank requires a Times-Interest Earned Ratio of 15 Industry Average for ROA: 15% FSA Memo for Principles II Not acceptable Acceptable Outstanding Calculated ratios-10% -Misses one or more ratios -Made 3 or more calculation errors -Calculated all necessary ratios -Made 1 or 2 minor calculation errors -Calculated all necessary ratios -Made no calculation errors Explained significance of ratios-30% --Did not use the ratios to make a decision or -Did not suggest a decision or -Suggested a decision thats not supported by the ratios -Suggested a decision and supported it by referring only in a general way to the ratios or -Makes little or no comparison to the ratios of previous years or of industry competitors -Suggested a decision and supported it by referring precisely to specific aspects of the ratios and -Makes a specific and detailed comparison to the ratios of previous years or of industry competitors -Relate ratio results to each other (address 4 key aspects of ratios from instructions) Length of discussion-10% -Makes a one-sentence recommendation with no discussion -Word count <500 -writes a few sentences describing the decision, but does not use ratios to support it. -word count -write well-developed paper that explains decision with specific reference>500 Addressed need of audience (manager of your company)-30% -Does not discuss the companys short-term and long-term ability to pay bills or Fails to discuss any of the following: - the companys profitability or - management of the company or --market perceptions of the company or --liquidity -Only generally discusses the companys short-term and long-term ability to pay bills\Only generally discusses one of the following -the companys profitability or - management of the company or - market perceptions of the company or --liquidity -Thoroughly discusses the companys short-term and long-term ability to pay bills (liquidity) -Thoroughly discusses the companys profitability and -Thoroughly discusses management of the company and --Thoroughly discusses market perceptions of the company Presented self professionally-20% -Poor editing (4 or more minor errors or major errors that interfere with meaning) - ratios or discussion are presented in an organized way -Reasonable editing ( 1 to 3 minor errors that do not interfere with meaning) -Ratios are organized -Sections of the prose memo are organized -Typed -Well edited (no major errors in spelling, punctuation or grammar) -Ratios are labelled by type Instructions: Discuss 4 key aspects of ratios: Did the ratio go up or go down? Is that good or bad? Why or Why Not? What does that tell me about.(solvency, liquidity, growth, etc.) I want them both love please the word and the excel please thx in advance