In this paper, please discuss the following case study. In doing so, explain your approach to the problem, support your approach with references, and execute your approach. Provide an answer to the case studys question with a recommendation.

Please refer to the attached income statement and balance sheet for the Diamond Gem Cleaning and Maintenance Company. Perform a financial ratio analysis of the company using the following ratios: (1) Gross profit margin, (2) Current ratio, and (3) Debt ratio.

Select significant lines from the financial statements and provide an observation of their trends (Is the account increasing or decreasing in value? What does this mean?)

Draw some conclusions based on your observations.

Support your observations with research, data, and logic. Research should be from at least four sources outside textbook materials and should address financial ratio and trend analysis. Discuss what limitations exist with the informational material provided. What other material would be important to your trend analysis?

Superior papers will do the following:

Provide a financial ratio analysis of the company using: (1) Gross profit margin, (2) Current ratio, and (3) Debt ratio.

Provide a narrative about, and observations of, significant lines from the statements.

Provide conclusions that are supported with research, data and logic.

Provide a brief discussion of what limitations exist with the informational material provided.

Balance Sheet Income Staten Contract Revenues 5,146,862 4,532,519 Contract Costs Gross Profit 614,343 General and Administrative Expenses 322,356 Operating Income 291,987 Other Expense 25,770 Income Before Provision for Income Taxes 266,217 Provision for Income Taxes 115,450 150,767 Net Income 159,867 Retained Earnings, Beginning Balance Net Income 150,767 310,634 Retained Earnings, Ending Balance Balance Sheet Income Statement Sheet3 ASSETS CURRENT ASSETS Cash 225,971 Contracts receivables 505,050 162,847 Other assets Total current assets 893,868 LONG TERM ASSETS Equipment 286,792 1,180,660 TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable 257,335 Line of credit 85,000 Accrued expenses Income tax payable Current portion of notes payable Deferred income taxes 72,495 46,660 31,747 78,460 Total current liabilities $71,697 LONG TERM LIABILITIES Notes payable (long term) 172,467 TOTAL LIABILITIES 744,164 STOCKHOLDERS EQUITY Common stock 62,000 Additional paid-in capital 63,862 Retained Earnings 310,634 Total stockholders' equity 436,496 1,180,660 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY