This term you have been learning to speak, read, and interpret a company’s financial story using the language of accounting. You have probably realized that the recording and reporting of information is vital to decision makers and other users of financial information. The numbers tell us a story about the business’s financial condition. Sometimes, that story needs to be further examined through additional analysis and comparison to other organizations in the industry.
In this final assignment, you will apply the concepts you have learned throughout the term to perform financial statement analysis techniques. Review the financial statements for Nature’s Remedy, a competitor of Red Apple Clinic, Inc., to answer the following questions:
1. Review Nature’s Remedy comparative financial statements for 20xx and 20×2.(File-1) Discuss the story told by horizontal analysis of the financial statements.
2. Review Nature’s Remedy income statement and balance sheet for 20×2 constructed using vertical analysis. (File-2) Discuss the story told by the vertical analysis of the income statement and balance sheet.
3. Calculate the profitability ratios for years 20xx and 20×2 for Nature’s Remedy using the comparative financial statements (File-1). Discuss Nature’s Remedy profitability story. How do the profitability ratios for Nature’s Remedy compare to Red Apple Clinic, Inc.’s ratios? How do they compare to the industry ratios? (File-3) What story do they tell? What does this indicate to internal and external users?
4. Calculate the liquidity and solvency ratios for years 20xx and 20×2 for Nature’s Remedy using comparative financial statements. (File-1) Discuss Nature’s Remedy liquidity and solvency story. How do these liquidity and solvency ratios for Nature’s Remedy compare to Red Apple Clinic, Inc.’s ratios? How do they compare to the industry ratios? (File-3) What story do they tell? What does this indicate to internal and external users?
5. As an overall analysis, what would you recommend to the owners of Nature’s Remedy regarding the profitability, liquidity, and solvency positions for the future?
