PWs CFO is retiring and you are one of the finalists for this job. Mr. John Smith has provided all the finalist with the Year-End December 31, 2018 trial balance of Prestige Worldwide. You will be using this information to analyze the financial health of Prestige Worldwide to prepare for the final interview. This will help you to examine past and current financial data so that the firms performance and financial position can be evaluated and future risks and potential can be estimated.

Beside Income Statement and Balance Sheet, you will also be using key financial ratios to analyze the financial position of the financial system. Prestige Worldwide provides general entertainment and advising services, emergency advising assistance and specialized advising services. PW provides full time employment to 325 people in the community.

Prestige Worldwide - Trial balance as of December 31, 2018:

Gross Service Revenue	$ 115,981,250
Bad Debt Expense	$ 2,655,000
Discounts on Sales	$ (3,575,000)
Salaries	$ 55,825,000
Benefits	$ 14,178,292
Administrative	$ 4,342,500
Insurance	$ 325,000
Interest	$ 164,575
Depreciation	$ 3,200,000
Maintenance	$ 435,500
Purchased Services	$ 6,146,500
Rent	$ 2,240,000
Supplies	$ 9,169,813
Utilities-Electricity	$ 356,000
Cash and Cash Equivalents	$ 9,545,000
Short-term Investments	$ 2,750,000
Net Accounts Receivables	$ 7,125,000
Inventory - Supplies	$ 1,135,000
Property and Equipment	$ 90,500,000
Accumulated Depreciation	$ (43,500,000)
Investment Income	$ 94,500
Account Payable	$ 2,375,000
Accrued Expenses	$ 9,125,000
Notes Payable	$ 16,515,000
Contributions Received by Prestige	$ 1,000,000
Long-Term Debt	$ 26,500,000
Retained Earnings	$ 13,040,000

Net revenues will reflect on Financial Statements what the finance organization actually expects to collect. Prestige Worldwide has a tax rate of 25% for 2018.

1. Using the information given above, construct the Income Statement and Balance Sheet for the Fiscal Year ended December 31, 2018.
2. What is the difference between gross revenue and the net revenue? Please explain your understanding of this difference, what it is comprised of, and why it is important.
3. What is the Operating Margin ratio (both definition and in words)? If the benchmark for operating margin ratio is 20.06% for the entertainment industry, how does Prestige World wides compare to this benchmark? Why is managing the Operating Margin so important for all financial Organizations? What are the implications to Prestige Worldwide of this ratio?
4. What is the Net Profit Margin Ratio (both definition and in words)? If the benchmark for net profit margin is 9.86% for the industry, how does PW's compare to this benchmark? What are the implications to PW's of this ratio?
5. What is the difference between operating margin and net income and why is it important to manage both?
6. What is the estimated Cash Flow using only the income statement or estimate the amount of cash generated during FY 2018 using the income statement. (Cash Flow = Net Income+Noncash expenses). The only Non-cash expense listed is depreciation expense. Why is this calculation Important to Manage?
7. What is the Times Interest Earned Ratio (both definition and in words)? What does it measure and why is it important? What is PWs Times Interest Earned ratio?