2: Financial Statement and Cash Flow AnalysisAccess Corporation
Balance sheet
as at 30 June 2016
Assets Liabilities and shareholders’ equity
Cash $ 500 Accounts payable $ 22,000
Marketable securities 1,000 Notes payable 47,000
Accounts receivable 25,000 Total current liabilities $ 69,000
Inventories 45,500 Long-term debt $ 22,950
Total current assets $ 72,000 Total liabilities $ 91,950
Land $ 26,000 Ordinary sharesa $ 31,500
Buildings and equipment 90,000 Retained earnings 26,550
Less: Total shareholders’ equity $ 58,050
Accumulated depreciation 38,000 Total liabilities and shareholders’ equity $150,000
Net fixed assets $ 78,000
Total assets $150,000
a The company’s 3000 outstanding ordinary shares closed 2016 at a price of $25 per share.a Use the preceding financial statements to complete the following table. Assume that the
industry averages given in the table are applicable for both 2015 and 2016.
b Analyse Access Corporation’s financial condition as it relates to: (1) liquidity; (2) activity; (3) debt;
(4) profitability; and (5) market value. Summarise the company’s overall financial condition.Access Corporation’s financial ratios
Industry average Actual ratio 2015 Actual ratio 2016
Current ratio 1.80 1.84 ___
Quick (acid-test) ratio 0.70 0.78 ___
Inventory turnover 2.50 2.59 ___
Average collection perioda 37 days 36 days ___
Average payment perioda 72 days 78 days ___
Debt-to-equity ratio 50% 51% ___
Times interest earned ratio 3.8 4.0 ___
Gross profit margin 38% 40% ___
Net profit margin 3.5% 3.6% ___
Return on total assets (ROA) 4.0% 4.0% ___
Return on ordinary equity (ROE) 9.5% 8.0% ___
Market/book (M/B) ratio 1.1 1.2 ___a Based on a 365-day year and on end-of-year figures.P2-6 Choose a company that you would like to analyse and obtain its financial statements from the
Internet. Now, select another company from the same industry and obtain its financial data.
Perform a complete ratio analysis on each company. How well does your selected company
compare with its industry peer? Which components of your company’s ROE are superior, and which
are inferior?