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Gilligan Island Inc., provides tropical vacations. The company sells vacations 30 days in advance. Your boss has no idea of the financial condition for some time and, therefore, is asking you to help with a more current assessment of the company's position for his/her meeting with the CEO.
Below you will find a series of accounts that represent the trial balance of the business firm. These accounts encompass both income statement and balance sheet accounts.
2009
2010
2011
Accumulated depreciation
176,580
209,050
242,725
Retained earrings
337,602
510,731
648,528
Sales
3,702,480
3,961,654
3,981,462
Cash
35,750
62,635
86,595
Bonds payable
421,000
334,000
325,000
Accounts receivable
246,580
293,430
349,182
Depreciation expense
31,265
32,470
33,675
Common stock shares outstanding
80,000
Plant and equipment, at cost
984,021
1,026,880
1,151,210
Taxes
79,484
93223
74,198
Accounts payable
62,685
116,696
188,569
Common stock, $1 par
75,000
Inventory
185,652
243,117
312,622
Prepaid expenses
6,575
21,525
26,325
Cost of goods sold
2,665,786
2,879,049
2,936,630
Interest expense
12,532
10,325
10,235
Selling and administrative expenses
765,800
773,458
788,927
Marketable securities
12,545
23,564
24,153
Other current liabilities
123,256
150,674
195,265
Capital paid in excess of par (common)
275,000
Required: Prepare (using Excel) a proper form income statement and balance sheet for the company. Make sure to create a proper form statement. Make sure you include these statements in your PowerPoint with speaking notes.
Based on the financial statements that were prepared with this data, complete the following financial ratio calculations and provide a narrative discussion of these results as compared to industry averages (provided.)
Ratios required:
Ratio
Industry Average
1. Profit margin
3.2%
2. Return on assets (use ending assets)
6.0%
3. Return on common equity (use ending common equity)
15.6%
4. Receivable turnover (use ending receivables)
8.5 x
5. Inventory turnover (use ending inventory)
12.0 x
6. Fixed asset turnover (use ending fixed asset balance)
5.75 x
7. Total asset turnover (use ending assets)
1.89 x
8. Current ratio
3.10
9. Quick ratio
1.40
10. Debt to total assets (use ending assets)
37.0%
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