Part 2 Requirements (15 points): Mr. James Techno, the company's President, has asked you to prepare a brief memo for him, which should include following three key items: 1) Analyze TECHNOGYM's 2016 financial statements, identifying the major factors causing changes in the company's financial health and performance Recommendation Look at the data behind the financial statements and the relationships among the values. It is ahways a good idea to start with a horizontal (changes year to year) and vertical percentage of assets, revenues) analyses to assess which values changed the most significantly so you can consider the possible causes and decisions How did the various business segments perform against expectations? Think about the related accounts and the journal entries that would be made for the changes. For example, if product sales increase, normally so would AR, bad debts, COGS, and sometimes inventory and accounts payable (if continued growth is expected). Does the timing of purchases and sales imply anything 2 Analyze the applicable ratios, then select several ratios of different types profitability, efficiency, liquidity, solvency) that provide the best insight into the company's financial performance and position. Recommendation Analysis is more than calculating a ratio and saying if it is good or bad. Don't just explain how the numbers changed explain what they reveal about business decisions and events, and what they might mean for the future. Think about things like: What were the big changes? What caused them? Are they reason for ongoing concern? How were complementaryratios impacted (e.g, if cash was obtained by issuing stock, current ratio would increase but return on equity would decrease) 3) Provide specific recommendations for improvements. Note: The 2015 Balance sheet, 2015 Income statement, and key ratios for both 2015 and 2016 are attached to this document. Please include (as an attachment a small table of the ratios you discuss in the memo. Top management understands the ratios so your explanation should not include definitions. Your explanation memo should be single spaced, and 1 to 1.5 pages in length (ot counting the ratio table) Part 2 Requirements (15 points): Mr. James Techno, the company's President, has asked you to prepare a brief memo for him, which should include following three key items: 1) Analyze TECHNOGYM's 2016 financial statements, identifying the major factors causing changes in the company's financial health and performance Recommendation Look at the data behind the financial statements and the relationships among the values. It is ahways a good idea to start with a horizontal (changes year to year) and vertical percentage of assets, revenues) analyses to assess which values changed the most significantly so you can consider the possible causes and decisions How did the various business segments perform against expectations? Think about the related accounts and the journal entries that would be made for the changes. For example, if product sales increase, normally so would AR, bad debts, COGS, and sometimes inventory and accounts payable (if continued growth is expected). Does the timing of purchases and sales imply anything 2 Analyze the applicable ratios, then select several ratios of different types profitability, efficiency, liquidity, solvency) that provide the best insight into the company's financial performance and position. Recommendation Analysis is more than calculating a ratio and saying if it is good or bad. Don't just explain how the numbers changed explain what they reveal about business decisions and events, and what they might mean for the future. Think about things like: What were the big changes? What caused them? Are they reason for ongoing concern? How were complementaryratios impacted (e.g, if cash was obtained by issuing stock, current ratio would increase but return on equity would decrease) 3) Provide specific recommendations for improvements. Note: The 2015 Balance sheet, 2015 Income statement, and key ratios for both 2015 and 2016 are attached to this document. Please include (as an attachment a small table of the ratios you discuss in the memo. Top management understands the ratios so your explanation should not include definitions. Your explanation memo should be single spaced, and 1 to 1.5 pages in length (ot counting the ratio table)
