Reference no: EM131316302

Accounting

FALCONS INCORPORATED

Assets

	2013	2012
Cash and Marketable Securities	10	80
Mc.. Receivable	375	315
Inventories	615	415
Total Current Ass.	1,000	810
Net plant and equipment	1,000	870
TOTAL ASSETS	2,000	1,680

Liabilities and Equity
Moon. Payable	60	40
Notes Payable	140	60
Accruals	110	130
Total Current Liabilities	310	230
Long Tmn Bonds	754	580
TOTAL DEBT	1,064	10
Preferred Stock	40	40
Common Stock	130	130
Retained earnings	766	700
TOTAL COMMON EQUITY	896	830
TOTAL LIABILITIES AND EQUITY	2,000	1,680

 

Income Statement 12/31/04      2013      2012

Net Sales                                   3,200      2,830

Operating Costs (excludes Dep/Amortization)2700, 2497

EBITDA                                       110          353

Depreciation                               100          90

Amonization                                  0             0

Depreciation and Amortization   100           90

EBIT                                            400          263

Less Interest                              88              60

EBT                                             312           203

Taxes (400)                                124.8         81.2

NET INCOME (before Preferred Dividends) 187.2 121.8
Preferred Dividends                                      4       4

NET INCOME                               183.2          117.8

Common Dividends                     117              53

Addition to Retained Earnings    66.2             64.8

REQUIREMENTS:

You are a potential investor of Falcons Incorporated and was given the financial statements of the company for the year ended 2012 and 2013. Evaluate the financial status of the company in terms of its liquidity, solvency, structure and profitability. Use your comprehensive analysis to decide whether it would be a wise decision to invest in the company or not. You can make use of various tools in financial analysis such as horizontal (increase-decrease method), vertical (common size financial statement), and financial ratio analysis.

The company provides Preferred and Common Stocks to stockholders. Which among the two would be better to invest in? Discuss comprehensively the factors that you will consider in choosing the type of stock that you will invest in.