Project Spring 2020-2021 Suppose you are interested in evaluating Leeds and Creative companies' financial performance during 2020; both companies operate in the technological sector. Given the income statement and the balance sheet of each company, answer the following questions: 1. Compile the Pro forma Income statement for Leeds and Creative companies for the year 2020 using percent of sales method. Use the information provided on the excel sheets. (3 marks) 2. Fill in the missing amounts in Leeds and Creative companies balance sheets. (3 marks) Given that: Leeds market price per share in 2020 = $8. Leeds dividends in 2020 = $22,000. Creative market price per share in 2020 =$10. Creative dividends in 2020 = $34,000. 3. Calculate the financial ratios for both companies in 2020. (3 marks) Note: Purchases were %70 of the cost of goods sold for both companies in 2020. Financial Ratios Leeds company Creative company Current ratio Quick ratio Inventory turnover Average age of inventory Average collection period Average payment period Asset turnover Debt ratio Debt to equity ratio Times interest earned ratio Gross profit margin Operating profit margin Net profit margin ROA ROE 4. Analyze the overall financial situation from a cross-sectional viewpoint. Compare each companys ratios with the industry average. What are the strengths and weaknesses of each company? Which company is best to invest in and why? (3 marks) Financial ratio Industry Average Current ratio 2 Quick ratio 1.91 Inventory turnover 8.12 times Average age of inventory 42 days Average collection period 30 days Average payment period 50 days Asset turnover 0.85 Debt ratio 50% Debt to equity ratio 90% Times interest earned ratio 5 Times Gross profit margin 32% Operating profit margin 14% Net profit margin 8% ROA 7% ROE 12% 5. Prepare the cash flow statement for both companies for the year ended December 31st, 2020, using the indirect method. (3 marks)

or . A B D E 2 3 4 5 6 Leeds company Balance Sheet December 31, 2019 and 2020 2019 2020 Assets Cash and Cash equivalents 200,000 230,000 Accounts receivable 50,000 50,500 Inventory 150,000 Missing amount Prepaid expenses 18,000 25,000 Short term derivative assets 30,000 40,000 7 8 9 10 11 12 Total current assets 448,000 505,500 13 14 15 16 515,000 700,000 5,000 5,500 510,000 Missing amount 62,000 150,000 $ 1,020,000 Missing amount 17 18 19 20 21 22 23 Property, plant, and equipment Accumulated depreciation Net property, plant, and equipment Goodwill Total Assets Liabilities Accounts payable Wages payable Current portion of long-term debt Accrued expenses Total Current Liabilities Long-term debt Total Liabilities Owner's Equity Common stock: $2.5 par, shares issued and outstanding in 2019: 60,000; in 2020: 75,000 Paid in capital in exces of par Retained earnings Total Owner's Equity 22,000 30.000 6,000 6,000 15,000 21,000 7,000 Missing amount 50,000 60,000 150,000 90,000 200,000 $ 150,000 24 25 26 $ 27 28 29 Missing Missing amount amount 270,000 Missing am 400,000 Missing amount Missing Missing amount amount 30 31 32 33 34 35 36 4. Analyze the overall financial situation from a cross-sectional viewpoint. Compare each company's ratios with the industry average. What are the strengths and weaknesses of each company? Which company is best to invest in and why? (3 marks) Financial ratio Current ratio Quick ratio Inventory turnover Average age of inventory Average collection period Average payment period Asset turnover Debt ratio Debt to equity ratio Times interest earned ratio Gross profit margin Operating profit margin Net profit margin ROA ROE Industry Average 2 1.91 8.12 times 42 days 30 days 50 days 0.85 50% 90% 5 Times 32% 14% 8% 7% 12% 5. Prepare the cash flow statement for both companies for the year endedDecember 31st, 2020, using the indirect method. (3 marks) = or . A B D E 2 3 4 5 6 Leeds company Balance Sheet December 31, 2019 and 2020 2019 2020 Assets Cash and Cash equivalents 200,000 230,000 Accounts receivable 50,000 50,500 Inventory 150,000 Missing amount Prepaid expenses 18,000 25,000 Short term derivative assets 30,000 40,000 7 8 9 10 11 12 Total current assets 448,000 505,500 13 14 15 16 515,000 700,000 5,000 5,500 510,000 Missing amount 62,000 150,000 $ 1,020,000 Missing amount 17 18 19 20 21 22 23 Property, plant, and equipment Accumulated depreciation Net property, plant, and equipment Goodwill Total Assets Liabilities Accounts payable Wages payable Current portion of long-term debt Accrued expenses Total Current Liabilities Long-term debt Total Liabilities Owner's Equity Common stock: $2.5 par, shares issued and outstanding in 2019: 60,000; in 2020: 75,000 Paid in capital in exces of par Retained earnings Total Owner's Equity 22,000 30.000 6,000 6,000 15,000 21,000 7,000 Missing amount 50,000 60,000 150,000 90,000 200,000 $ 150,000 24 25 26 $ 27 28 29 Missing Missing amount amount 270,000 Missing am 400,000 Missing amount Missing Missing amount amount 30 31 32 33 34 35 36 4. Analyze the overall financial situation from a cross-sectional viewpoint. Compare each company's ratios with the industry average. What are the strengths and weaknesses of each company? Which company is best to invest in and why? (3 marks) Financial ratio Current ratio Quick ratio Inventory turnover Average age of inventory Average collection period Average payment period Asset turnover Debt ratio Debt to equity ratio Times interest earned ratio Gross profit margin Operating profit margin Net profit margin ROA ROE Industry Average 2 1.91 8.12 times 42 days 30 days 50 days 0.85 50% 90% 5 Times 32% 14% 8% 7% 12% 5. Prepare the cash flow statement for both companies for the year endedDecember 31st, 2020, using the indirect method. (3 marks) =