Assignment 2: Final Project: Financial Statement: Comparative Analysis
Using the financial statements (income statement and balance sheet) you prepared in W1: Assignment 3, and the Financial Statements given in the sidebar, create a comparative income statement and balance sheet. This comparative analysis is done to periodically check the financial health of an organization. Such analyses help managers to identify the items, processes, or expenses that need to be carried forward or eliminated from the business life cycle. This, in turn, aids as a useful insight during the budget development process.
For this comparative analysis:
1.Copy the income statement and balance sheet you populated in
W1: Assignment 3 into a new Microsoft Excel document and name it W2_A2_lastname_firstname.xls. This information will represent the financial statement of The Green Restaurant for the previous year.
2.Copy the information for the current year’s income statement and balance sheet, as given in the Financial Statements in the sidebar, in the W2_A2_lastname_firstname.xls.
3.Compare the financial statements of the previous and the current year to create a comparative income statement and balance sheet.
4.Use horizontal analysis to calculate the differences in dollars and percentages and explain the possible reasons for the differences.
5.Calculate the following ratios for the current financial year:
•Current ratio
•Solvency ratio
•Return on owners’ equity ratio
•Profit margin ratio
•Food or beverage sales ratio
•Cost of sales ratio for food and beverage
•Labor cost ratio
6.Compare your ratio results to the previous year’s values and explain possible reasons for the differences. Be sure to include a discussion of controllable and uncontrollable expenses and how these can impact the past, present, and future financial health of the establishment.
Save the comparative financial statement as W2_A2_lastname_firstname.xls and submit it to this Discussion Area.
Use this Discussion Area to comment on the assignments submitted by at least two of your peers.
Assignment 2 Grading Criteria
Maximum Points
Set up Excel document as per instructions to create comparative financial statements.
6
Identified controllable and uncontrollable expenses for current and prior year.
6
Used horizontal analysis to calculate differences in dollars and percentages and explained the possible reasons for the differences.
10
Calculated the following ratios for the current financial year:
•Current ratio
•Solvency ratio
•Return on owners’ equity ratio
•Profit margin ratio
•Food or beverage sales ratio
•Cost of sales ratio for food and beverage
•Labor cost ratio
14
Compared the ratio results to the previous year’s values and explained possible reasons for the differences.
6
Followed MLA standards for citing sources.
4
Commented on the assignments submitted by at least two of your peers.
4
Total:
50
Balance Sheet
The Green Restaurant
December 31, 20XX
Assets
Cash $17,000
Food Inventory $1,500
Prepaid Rent $1,500
Equipment $10,000
Less: Accumulated Depreciation -$1,920
Total Assets $28,080
Liabilities and Owners’ Equity
Accounts Payable $1,000
Accrued Expenses Payable $4,000
Notes Payable $7,200
Accrued Interest $100
Mr. Green, Capital $15,780
Total Liabilities and Owners’ Equity $28,080
THE GREEN RESTAURANT
BALANCE SHEET
AS OF DECEMBER 31,2014
CURRENT ASSETS $ $
Cash 15,905
Accounts receivable
Prepaid rent 1,500
Inventory
Food 1,200
Total Current assets 18,605
LONG-TERM ASSETS
Equipment 10,000
Total long-term assets 10,000
Total assets 28,605
CURRENT LIABILITIES
Accounts payable 500
Accumulated depreciation 160
Accumulated expense payable 4300
Acrued interest 111
Total current liabilities 5071
LONG-TERM LIABILITIES
Notes payable 9000
Total long-term liabilities 9000
EQUITY
Capital 5000
Retained earnings 9534
Total equity 14534
Total liabilities and equity 28605
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