Management Accounting Assignment-2 (Due: 11:59 pm Feb 11) 1. Chicken Inc. and Egg Inc. are both in the restaurant business. Both companies deal only with corporate clients for special events and all sales are on credit. Below is select financial information for the current year. Chicken Inc. Egg Inc. Income Statement: Sales Revenue $150,000 $135,000 Cost of Sales 43.750 41,350 Gross Pront 101.250 93,150 Operating Expenses Salaries Expense 22,500 27,000 Depreciation Expense 15,000 13,500 Advertising Expense 7,500 6,750 Interest Expense 6.750 5,130 Total Operating Expenses 51.750 52 380 Net Income before Taxes 49.500 40,770 Income Tax Expense 26.250 24,300 Net Income after Taxes $23,250 $16,470 Balance Sheet: Cash Accounts Receivable Inventory Equipment Total Assets $40.850 15,000 34,500 85,800 $176,150 $24.510 9,000 20,125 51,480 $105,115 Accounts Payable $21,000 $32,000 Unearned Revenue 27800 18,570 Long-Term Debt 39,350 15,635 Shareholders' Equity 88.000 38,810 Total Ulabilities and Shareholders' Equity $176 150 $105,115 a) Calculate each ratio listed below for each company and indicate which company is stronger for each one. If averages are required in any of your ratios, use the current period. Which company Chicken Inc. Egg Inc. is stronger? Gross Profit Margin Nct Profit Margin Return on Fquity PROF) Current Ratio Quick Ratio Debt-to-Equity Ratio Inventory Turnover Days Sales Outstanding b) Examining all of the ratios, explain which company has a stronger financial position with respect to the following: Profitability: Liquidity: Operations Management: 2. After learning that you are taking a hospitality management accounting course, Kim, your close friend, has come to ask you for investment advice. She went skiing at Rocky Alpine Retreat last winter and was so impressed by the resort that she has been thinking about investing in it. Because she doesn't know how to read financial statements, she asked you to analyze Rocky Alpine Retreat's financial statements and comment on the company's liquidity, profitability and leverage. The statements are presented below. Rocky Alpine Retreat Consolidated Balance Sheet (In thousands) As at September 30, 2020 and 2019 2020 2019 Assets Cash Short-term investments Accounts recelvable Inventory Prepaid expenses Total Current Assets Notes receivable Property, buildings & equipment Intangible assets Total Assets 58410 145 4,496 18,633 3,985 35,669 777 319,897 300,778 $657,121 $41.353 $ 311 3,323 15,856 2.727 63,570 2,636 322.316 311428 $699.950 $27.785 1.645 22347 Liabilities Accounts payable and acuued liabilties Income taxes payable Deferred revenue Total Current Liabilities Long-term debt Total Labilities Shareholders' Equity Common shares Retained earrings deficit) Total Shareholders' Equity Total Liabilities and shareholders' Equity $27,854 2403 27,610 57,867 229,855 287.222 51,777 258,042 309,819 441328 (73,9491 369.399 $657,121 444 912 (54.781) 390,131 $699,950 Rocky Alpine Retreat Consolidated Income Statement in thousands) For the Years Ended September 30, 2020 and 2019 2020 Resort Revenue $254,517 Operat ng expenses 134,061 Depreciation S amortization expenses 41.254 Selling, general & administrative expenses 27,761 Total Expenses 203,096 Income from Operations before Income Tax 51,421 Income tax expense 12,400 Net Income $39,021 2019 $240780 126.673 40.249 27673 1914,595 46,185 16,200 $29.985 Rocky Alpine Retreat Summary of the Statement of Cash Flows [In thousands) For the Years Ended September 30, 2020 and 2019 2020 2019 Net cash prov ded by operating activities $81.413 $78,725 Net cash used by Investing activities (26.416) 124.345 Net cash used by financing activities 187.940 156.6611 Net increase decrease in cash ($32.943 1$2.281 For the calculation that requires average shareholders' equity, Rocky A plne Retreat's shareholders equity balance at the end of 2018 was $479,340. Required a) Explain to Kim what a retained earnings deficit in Rocky Alpine Retreat's balance sheet means b. Assess Rocky Alpine Retreat's liquidity using relevant ratios and provide an explanation. C. Assess Rocky Alpine Retreat's profitability using relevant ratios and provide explanation. d. Assess Rocky Alpine Retreat's leverage using the relevant ratio and provide an explanation