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Please refer to the attached income statement and balance sheet Select significant lines from the financial statements and provide an observation of their trends (Is

Please refer to the attached income statement and balance sheet

Select significant lines from the financial statements and provide an observation of their trends (Is the account increasing or decreasing in value? What does this mean?)

  • Provide a financial ratio analysis of the company using: (1) Gross profit margin, (2) Current ratio, and (3) Debt ratio. Gross profit margin is 91.0% (very significant). The current ratio is 1.56 (under 2.5). The debt ratio is 63.0% (moderate to high leverage).
  • Provide a narrative about, and observations of, significant lines from the financial statements.
  • Discuss what limitations exist with the informational material provided.
image text in transcribed Diamond Gem Cleaning and Maintenance Service Balance Sheet Year Ended December 31, 20XX ASSETS CURRENT ASSETS Cash Contracts receivables Other assets 225,971 505,050 162,847 Total current assets 893,868 LONG TERM ASSETS Equipment 286,792 TOTAL ASSETS 1,180,660 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable Line of credit Accrued expenses Income tax payable Current portion of notes payable Deferred income taxes 257,335 85,000 72,495 46,660 31,747 78,460 Total current liabilities 571,697 LONG TERM LIABILITIES Notes payable (long term) 172,467 TOTAL LIABILITIES 744,164 STOCKHOLDERS' EQUITY Common stock Additional paid-in capital Retained Earnings Total stockholders' equity 62,000 63,862 310,634 436,496 Diamond Gem Cleaning and Maintenance Service Balance Sheet Year Ended December 31, 20XX TOTAL LIABILITIES AND STOCKHOLDERS EQUITY 1,180,660 Diamond Gem Cleaning and Maintenance Service Statement of Income and Retained Earnings Year Ended December 31, 20XX Contract Revenues 5,146,862 Contract Costs 4,532,519 Gross Profit 614,343 General and Administrative Expenses 322,356 Operating Income 291,987 Other Expense 25,770 Income Before Provision for Income Taxes 266,217 Provision for Income Taxes 115,450 Net Income 150,767 Retained Earnings, Beginning Balance 159,867 Net Income 150,767 Retained Earnings, Ending Balance 310,634

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