MCM Industries

The following information was obtained from the records of MCM Industries: Accounts Payable

Accounts Receivable

Building, Furniture and fixtures, net

Cash

Common stock

Cost of goods sold

General and Adm. expense

Income tax expense

Interest expense

Inventory

Long-term debt

Long Term Notes Payable

Other current assets

Other accrued payables

Retained earnings

Sales

Selling expense December 31,

2012

$ 79,000

325,000

1,161,000

$ 165,000

1,140,332

13,823,440

2,682,000

994,000

29,000

1,095,000

211,000

85,000

162,000

18,000

1,374,668

$ 20,632,000

640,000 December 31,

2011

$ 69,200

332,200

1,161,000

$ 188,000

1,248,000

12,533,300

2,314,000

1,337,000

38,000

1,064,000

256,000

110,000

165,000

16,000

1,211,000

$ 19,282,000

578,000 Required:

1. Prepare an Income Statement and a Balance Sheet for MCM Corporation for 2011 and

2012.

2. Prepare a vertical analysis of the Balance Sheet and Income Statement for 2011 and

2012. Note any areas of concern and suggested actions management may need to take to

address the areas of concern.

3. Compute the following ratios for both years:

Current ratio

Quick ratio

Inventory Turnover ratio

Debt to equity ratio

Times interest earned

Return on equity

Gross margin percentage

4. Industry Comparison - Compare the performance of MCM Industries to the 2012 industry

ratios below and identify differences between the ratios of MCM and the industry

averages. Include any explanation on why a ratio may be higher or lower than the Page 1 of 2 industry average. You should also include any actions management needs to take to

bring the ratios of MCM more in line with the industry averages.

Industry average ratios:

Current ratio Quick (Acid) ratio 4.0 to 1 Inventory turnover 6.2 times Debt to equity ratio .68 to 1 Time Interest Earned Return on Equity 68% Gross Margin Percentage 45%