Income Statements

Balance Sheets

Fashion Forward

Dream Designs

Fashion Forward Fashion Forward

Dream Designs Dream Designs

12/31/2018

12/31/2018

12/31/2018 12/31/2017

12/31/2018 12/31/2017

Revenue

Current Assets

Credit Sales 2,000,000

4,320,000

Cash and Cash Equivalents 950,000 980,000

1,710,000 1,705,000

Non-Credit Sales 500,000

1,080,000

Accounts Receivable 200,000 150,000

250,000 275,000

Total Revenue 2,500,000

5,400,000

Inventory 112,000 105,000

200,000 215,000

Other Current Assets 35,000 50,000

120,500 100,000

Cost of Sales 1,400,000

3,250,000

Total Current Assets 1,297,000 1,285,000

2,280,500 2,295,000

Gross Profit 1,100,000

2,150,000

Property, Plant and Equipment 635,000 700,000

850,000 900,000

Goodwill 750,000 750,000

1,150,000 1,150,000

Operating Expenses

Other Long-Term Assets 65,000 70,000

100,750 105,000

Research and Development 50,000

200,000

Total Assets 2,747,000 2,805,000

4,381,250 4,450,000

Selling, General, and Administrative 750,000

1,600,000

Total Operating Expenses 800,000

1,800,000

Current Liabilities

Accounts Payable 545,000 535,000

845,750 875,000

Earnings Before Interest and Taxes 300,000

350,000

Short-Term Debt 25,000 -

50,000 60,000

Other Current Liabilities 600,000 510,000

730,000 740,000

Interest Expense (18,000)

(50,000)

Total Current Liabilities 1,170,000 1,045,000

1,625,750 1,675,000

Income Before Tax 282,000

300,000

Long-Term Debt 75,000 -

120,500 130,000

Income Tax Expense (145,500)

(87,500)

Other Long-Term Liabilities 100,000 75,000

155,000 165,000

Net Income 136,500

212,500

Total Liabilities 1,345,000 1,120,000

1,901,250 1,970,000

Stockholders Equity

Common Stock 500,000 775,000

749,500 942,750

Preferred Stock 150,000 294,500

390,000 409,250

Retained Earnings 752,000 615,500

1,340,500 1,128,000

Total Stockholders Equity 1,402,000 1,685,000

2,480,000 2,480,000

Total Liabilities and Stockholders Equity 2,747,000 2,805,000

4,381,250 4,450,000

- -

- -

Case Study:

You work in the mergers and acquisitions department of a large conglomerate who is looking to invest in a retail business. Two companies, Fashion Forward and Dream Designs, are the final two options being considered. You have the most recent available income statements and two years of balance sheets for each company.

Compute the following ratios for each company:

• Profit Margin Ratio
• Return on Assets
• Current Ratio
• Quick Ratio
• AR Turnover Ratio
• Average Collection Period
• Inventory Turnover Ratio
• Average Sales Period
• Debt to Equity Ratio

For this assignment:

• Compute all required amounts and explain how the computations were performed
• Evaluate the results for each company and explain what each ratio means
• Compare and contrast the companies.
• Based on your analysis:
• recommend which company the organization should pursue
• Thoroughly support your conclusion, including what other factors should be considered
• Be specific.

Superior papers will:

• Perform all calculations correctly.
• Articulate how the calculations were performed.
• Evaluate the ratios computed and explain the meaning of the ratios.
• Compare the companies.
• Recommend which company to pursue, supported by well-thought-out rationale and considering any other factors that could impact the recommendation.