- In the Microsoft Excel file on the "Ratio template for students" tab you will be calculating Liquidity, Solvency, and Profitability ratios for each company, stating what makes a ratio more successful and comparing the results between the two companies to determine which company has stronger results. (32 marks)
The calculations for Arrow and Root will be completed in columns D and F. Please ensure that you indicate the units for each ratio calculation. For example, if the unit is days, times, :1, record that in columns E and G beside your calculation. Complete all calculations to 2 decimal places. The calculation portion of the assignment must be completed in Microsoft Excel (preferably using linking of cells) and then submitted either electronically or printed based on your instructor preference.
In column H comment on whether the ratio should be higher or lower to be more successful. Please note when comparing the working capital ratios between companies, the companies need to be considered comparable in size. For the purposes of this assignment, assume Arrow and Root are comparable.
In column J comment on which company has a better ratio result based on your calculations. (It may be the same depending on your particular version.)
2. In Microsoft Word, you will write a conclusion relating to which company you would approve the loan for based on your calculations on the "Ratio Template for Students" tab (in Microsoft Excel in Part 1 above). The final write-up should be in paragraph form and Liquidity, Solvency, and Profitability should all be addressed separately in the correct section of the document. You will also answer the final question relating to data integrity. (5 marks)
B D G Is higher Which Arrow Root or lower company is 11 better? better? Liquidity Working Capital: Current Assets - Current Liabilities Current Ratio: Current Assets Current Liabilities 11 Quick Ratio: 12 Cash + Short-term Investments + Accts Receivable 13 Current Liabilities 14 15 Receivable Turnover: 16 Credit Sales Accounts Receivable 18 9 Average Collection Period: 20 365 21 Receivable Turnover Page 23 Inventory Turnover: 24 Cost of Goods Sold 25 Inventory 6 7 Days in Inventory: 28 365 Inventory Turnover 30 1 Solvency 32 33 Debt to Total Assets: 34 Total Liabilities 35 Total Assets 36 37 Times Interest Earned 38 Profit+Interest Expense+Income Tax Expense 39 Interest Expense 40 41 Debt to Total Equity: 42 Total Liabilities 13 Total Equity 44 ProfitabilityProfitabilig Profit Margin: Profit Sales Return On Assets (RDA): Profit Total Assets Asset Turnover: Sales Total Assets Earnings Per Share: Profit Preferred Dividends Weighted Average Number of Shares Price Earnings: Market Price per share EPS Return on Common shareholder's Equity Profit Preferred Dividends Common shareholder's Equity '3 Q. A B D E F G H ROOT LTD. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2020 CANADIAN DOLLARS (millions of dollars) 6 Revenue Sales Revenue * $ 1,440 8 Rent Revenue 516 9 Interest Revenue 232 10 Other Revenues 27 11 Total revenues $ 2,215 12 Operating expenses 14 Cost of Goods sold 300 15 Wages expense 318 16 Salary expense 134 17 Benefit expense 202 18 Research and development expense 51 19 Repairs and maintenance expense 43 20 Sales and distribution costs expense 143 21 Depreciation expense - equipment 30 Depreciation expense - vehicles 8 Depreciation expense - furniture 10 Depreciation expense - office building 8 Insurance expense 11 26 Property taxes expense 57 Food and beverage expense 86 28 Supplies expense 77 29 Interest expense 71 30 Information technology expense 24 Advertising expense 288 32 Total operating expenses 1,861 33 Profit before income tax 354 34 Income Tax expense 89 Profit 265 36 37 * Denotes all of these sales were made on credit 38 39 ROOT LTD. 40 STATEMENT OF FINANCIAL POSITION 41 AS AT DECEMBER 31, 2020 42 CANADIAN DOLLARS (millions of dollars) 43 14 ASSETS Arrow-S Root-S Ratio template for students +D 40 STATEMENT OF FINANCIAL POSITION 41 AS AT DECEMBER 31, 2020 42 CANADIAN DOLLARS (millions of dollars) 43 44 ASSETS 45 46 Current assets 47 Cash 1,932 48 Short-term investments 501 49 Accounts receivable 336 50 Inventory 79 51 Spare parts and supplies inventory 75 52 Prepaid Maintenance 235 53 Prepaid expenses 19 54 Total current assets 3,177 55 6 Investments 199 57 58 Property plant, and equipment 59 Land 87 Office Building $ 3,835 61 Less: Accumulated depreciation 505 3,330 62 Equipment 2,365 63 Less: Accumulated depreciation 463 1,902 64 Vehicles 850 65 Less: Accumulated depreciation 87 763 66 Furniture 128 67 Less: Accumulated depreciation 51 77 68 Total property, plant and equipment 6,159 69 70 Intangible assets 71 Trademark 73 72 Patent 34 73 Total intangible assets 107 74 75 Total Assets 9.642 76 Liabilities and Shareholders' Equity 78 79 Current Liabilities 80 Accounts payable 1,191 81 Accrued liabilities 267 82 Deferred Revenue 465 83 Current portion of bank loan and mortgage payable 421 84 Income Tax payable 519 85 Total Current Liabilities 2,863 86 87 Non-current liabilities 88 Bank loan payable 509 89 Mortgage Payable 306 90 Bond payable 2,340 91 Total Non-current liabilities 3,155 92 Total Liabilities 5,018 93 94 Shareholders' Equity 95 Preferred Shares * * 451 96 Common Shares *** 941 97 Retained Earning 2,232 98 Total Shareholders' Equity 3,624 99 100 Total liabilities and shareholders' equity 9.642 101 102 ** There were no preferred dividends declared this year. 103 *** The Weighted Average number of common shares outstanding are: 25,000,000 104 The Market price per common share is : 20 105 106 Arrow-S Root-S Ratio template for students +D ARROW LTD. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2020 CANADIAN DOLLARS (millions of dollars) Revenue Sales Revenue * $ 1,063 Rent Revenue 541 Interest Revenue 320 Other Revenues 214 Total revenues $ 2,138 Operating expenses Cost of Goods sold 345 Wages expense 334 Salary expense 172 Benefit expense 109 Research and development expense 27 Repairs and maintenance expense 69 Sales and distribution costs expense 106 Depreciation expense - equipment 31 Depreciation expense - vehicles Depreciation expense - furniture UI N W Depreciation expense - office building Insurance expense 19 Property taxes expense 41 Food and beverage expense 76 Supplies expense 57 28 Interest expense 31 10 30 Information technology expense Advertising expense 195 Total operating expenses 1,632 Profit before income tax 506 Income Tax expense 127 Profit 379 * Denotes all of these sales were made on credit ARROW LTD. STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2020 CANADIAN DOLLARS (millions of dollars) ASSETS Current assets Cash $ 1,627 Short-term investments 881 Accounts receivable 242 Inventory 91 Spare parts and supplies inventory 90 Prepaid Maintenance 381 Prepaid expenses 53 Total current assate $ 3 365 Arrow-S Root-S Ratio template for students +A B C D E F G H STATEMENT OF FINANCIAL POSITION AS AT DECEMBER 31, 2020 CANADIAN DOLLARS (millions of dollars) 45 ASSETS 46 47 Current assets 48 Cash $ 1,627 Short-term investments 881 50 Accounts receivable 242 Inventory 91 Spare parts and supplies inventory 90 Prepaid Maintenance 381 Prepaid expenses 53 Total current assets $ 3,365 7 Investments 138 58 59 Property plant, and equipment Land 126 Office Building $ 2,312 Less: Accumulated depreciation 143 2,169 63 Equipmen 1,928 Less: Accumulated depreciation 458 1,470 Vehicles 852 Less: Accumulated depreciation 161 691 67 Furniture 167 68 Less: Accumulated depreciation 40 127 69 Total property, plant and equipment 4,583 Intangible assets Trademark 65 Patent 20 74 Total intangible assets 94 75 Total Assets 8,180 77 Liabilities and Shareholders' Equity 78 79 Current Liabilities 80 Accounts payable 463 81 Accrued liabilities 107 Deferred Revenue 449 Current portion of bank loan and mortgage payable 382 Income Tax payabl 563 85 Total Current Liabilities 1,964 87 Non-current liabilities 88 Bank loan payable 559 Mortgage Payable 261 Bond payable 1,163 Total Non-current liabilities 1,983 93 Total Liabilities 3,947 Shareholders' Equity 96 Preferred Shares * * 369 97 Common Shares *** 611 98 Retained Earning 3,253 99 Total Shareholders' Equity 4.233 100 101 Total liabilities and shareholders' equity 8,180 102 03 ** There were no preferred dividends declared this year. 104 *** The Weighted Average number of common shares outstanding are: 20,000,000 105 The Market price per common share is : 45 106 107 Arrow-S Root-S Ratio template for students + Ready
