Need answers to financial ratios and cash flow statement.

ACCOUNTING 202 evening edition Module 6 Case Study Your Future and Plush Carpet Mills Case Setting: It is Spring 2013 and you are looking for fulltime employment. Plush Carpet Mill, Inc. (PCM) has offered you a position as manager of its San Antonio, Texas production facility. Before accepting the job, however, you want to evaluate PCM's financial performance to make sure it is a sound company. PCM has provided you a copy of its year-end 2010, 2011 and 2012 balance sheets and income statements, and you have obtained the most recent industry data from the internet. Your task now is to assess the financial condition of PCM through both: a 2010-12 trend (Comparison over time) analysis and a peer group (Comparison to industry) analysis using 2012 data for PCM and the data for the carpet mill industry. Remember: In doing your analysis you are essentially telling a story about PCM's financial performance over the last few years and relative to other similar-sized firms in the industry. The relevant source data has been assembled in a Microsoft Excel template but will require your refinement. The Statement of Cash Flows and available industry benchmark data are included in the template. Required: In Thursday May 30 Class we will complete the construction of the excel spreadsheet by: 1) Use cell-referenced equations to construct common-size balance sheets and income statements for each of the three years and, 2) Produce financial ratios for each of the three years 3) You must assign qualitative assessments of Good, OK/Good, OK, OK/Poor, or Poor to the trends in each of the firm's financial ratios as well as to the degree to which the firm's financial ratios compare to available industry ratios. 4) In addition to the Excel requirements outlined above, you must answer the following set of analytical questions on the several areas of financial performance liquidity, asset management, financing of assets, profitability, and cash flowand then pull all of your analysis together to give an overall evaluation of the firm. This assignment will serve as the Chapter 12 End of Chapter Test and the In The News writing assignment for Module 6. It will be due in Angel by 9:45 pm Tuesday June 4. 1 ACCOUNTING 202 evening edition Module 6 Case Study In answering these questions, do not forget to look at the firm's common-size balance sheet and income statement items, including trends over 2010 - 12 and the relationship of 2012 common-size ratios to industry data. Oftentimes, you will see patterns in the common-size ratios that reinforce and further explain patterns in the financial ratios, and vice versa. Be sure your response includes what that particular ratio means and the impact it has on the overall financial health of PCM. By 9:45 pm June 4th you will upload to an Angel Dropbox your word processed responses as an attachment to the analysis questions that follow. This will serve as the Chapter 12 End of Chapter Test and the In The News writing assignment for Module 6. Class will not be held June 4. LIQUIDITY 1. Look at the current ratio and the quick (acid-test) ratio of PCM. What trends do you notice over 2010 12, and what does this suggest about PCM's liquidity? How does PCM's liquidity in 2012 compare with the industry average? 2. Now study the accounts receivables turnover, average collection period, inventory turnover, and average days of inventory for PCM. What do these patterns suggest about the firm's conversion of accounts receivable and inventories to cash? 3. Considering your answers to the two questions above, what is your overall assessment of PCM's liquidity position? What two major factors account for your assessment? 4. What is your assessment of the manner in which PCM is managing its assets? Pay attention to both trends and industry averages. SOLVENCY (Financing of Assets) 5. What is your assessment of the manner in which PCM is financing its assets? Pay attention to both trends and industry averages. What is the relationship between the debt to equity ratio and times interest earned as these relate to PCM? And is there any other possible explanation (outside of the firm's financial statements) for the observed trend in times interest earned? PROFITABILITY 6. What can you say about PCM's gross profit ratio and net profit ratio? Explain any patterns observed. 7. How are PCM's net profit ratio, and asset turnover ratio affecting the firm's pre-tax return on assets (ROA) and return on equity (ROE)? What is your overall assessment of the firm's profitability, including its earnings per share (EPS)? CASH FLOW 8. Referring to PCM's statement of cash flow for 2011 and 2012, assess PCM's cash flow situation noting both inflows and outflows? 2 ACCOUNTING 202 evening edition Module 6 Case Study OVERALL EVALUATION 9. Based on your answers to the questions above, what is your overall evaluation of PCM's financial condition? (Pull all your analysis together in answering this question.) 10. What is the market's assessment of PCM's financial condition? Explain. Does the market's assessment confirm or refute your analysis? 11. Based on your evaluation of PCM and the market's assessment of the firm, would you accept employment with the company? Explain. By 9:45 pm June 4th you will upload to an Angel Dropbox your word processed responses as an attachment to the analysis questions that follow. You should limit your response to one well-constructed paragraph (another if absolutely necessary). This will serve as the Chapter 12 End of Chapter Test and the In The News writing assignment for Module 6. Class will not be held June 4. Sample Format For Submission FIRST LINE BEGIN AT TOP MARGIN Your Name ACCT& 202 Date SKIP ONE LINE Plush Carpet Mills Case Study SKIP ONE LINE Requirement 1. Look at the current ratio and the quick (acid-test) ratio of PCM. What trends do you notice over 2010 - 12, and what does this suggest about PCM's liquidity? How does PCM's liquidity in 2012 compare with the industry average? SKIP ONE LINE Indent and begin your response. Double space text and indent each paragraph as you go. 3