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Comparative financial statement data of Banfield DVDs




See attached file.;Accounting analysis which involves calculation and equation formula. Analysis after calculation is part of the report and this is at master level but no accounting jargon is needed, just make it simple and straightforward. Referencing is needed if necessary in Harvard referencing method.;Question 1;Comparative financial statement data of Banfield DVDs, Inc., follow;BANFIELD DVDs, INC.;Comparative Income Statement;Years Ended December 31, 2008 and 2007;2008 2007;Net Sales 667,000 599,000;Cost of goods sold 378,000 283,000;Gross profit 289,000 316,000;Operating expenses 129,000 147,000;Income from operations 160,000 169,000;Interest expense 37,000 51,000;Income before income tax 123,000 118,000;Income tax expense 34,000 53,000;Net income 89,000 65,000;BANFIELD DVDs INC.;Comparative Balance Sheet;December 31, 2008 and 2007;2008 2007 2006*;Current assets;Cash 37,000 40,000;Current receivables, net 208,000 151,000 138,000;Inventories 298,000 286,000 184,000;Prepaid expenses 5,000 20,000;Total current assets 548,000 497,000;Property, plant, and equipment, net 287,000 276,000;Total assets 835,000 773,000 707,000;Total current liabilities 286,000 267,000;Long-term liabilities 245,000 235,000;Total liabilities 531,000 502,000;Preferred stock, 4% 50,000 50,000;Common stockholders' equity, no par 308,000 221,000 198,000;Total liabilities & stockholders' equity 889,000 773,000;* Selected 2006 amounts;Other Information;1. Market price of Banfield's common stock: &92.80 at December 31, 2008, and;$67.50 at December 31, 2007.;2. Common shares outstanding: 15,000 during 2008 and 14,000 during 2007.;3. All sales on credit.;Requirements;1. Compute the following ratios for 2008 and 2007: (12 marks);a. Current ratio;b. Times-interest-earned ratio;c. Inventory turnover;d. Return on common stockholders' equity;e. Earnings per share of common stock;f. Price/ earning ratio;2. Decide whether (a) Banfield's ability to pay its debts and to sell inventory;improved or deteriorated during 2008 and (b) the investment attractiveness of its;common stock appears to have increased or decreased. (9 marks);3. Analysts look for red flags that may signal financial trouble. Identify six most;common red flags and evaluate whether any of these red flags apply to Banfield;DVD. (9 marks);Question 2;Part A;COSMO COFFEE;Contribution Margin Income Statement;For the Month of February 2008;Sales revenue 90,000;Variable costs;Costs of goods sold 32,000;Marketing costs 10,000;General & administrative cost 3,000 45,000;Contribution margin 45,000;Fixed costs;Marketing cost 16,500;General & administrative cost 3,500 20,000;Operating income 25,000;Cosmo Coffee sells three small coffees for every large coffee. A small coffee sells for $2, with a variable cost of $1. A large coffee sells for $4, with a variable cost of $2.;Requirements;1. Determine Cosmo Coffee's monthly breakeven point in the numbers of small;coffees and large coffees. Prove your answer by preparing a summary contribution;margin income statement at the breakeven level of sales. Show only two categories;of costs: variable and fixed. (8 marks);2. Compute Cosmo Coffee's margin of safety in dollars for February 2008. (2 marks);3. If Cosmo Coffee can increase monthly sales volume by 10% what will operating;income be? (The sales mix remains unchanged.) (5 marks);Part B;The Coca-Cola Company hardly needs an introduction. A line taken from the cover of a recent annual report says it all, if you measured time in servings of Coca-Cola, "a billion servings of Coca-Cola's ago was yesterday morning." On average, every U.S. citizen drinks 363 8-ounce servings of Coca-Cola products each year. Coca-cola's primary line of business is the making and selling of syrup to bottlers. These bottlers then sell the finished bottles and cans of Coca-Cola to the consumer.;In the annual report of Coca-cola, the following information was provided.;THE COCA-COLA COMPANY;Management Discussion;Our gross margin declined to 61 percent this year from 62 percent in the prior year, primarily due to costs for materials such as sweeteners and packaging.;The increases (in selling expenses) in the last two years were primarily due to higher marketing expenditures in support of our Company's volume growth.;We measure our sales volume in two ways: (1) gallon shipments of concentrates and syrups and (2) unit cases of finished product (bottles and cans of Coke sold by bottlers).;Requirements;a) Are sweeteners and packaging a variable cost of a fixed cost? What is the impact;on the contribution margin of an increase in the per unit cost of sweeteners or;packaging? What are the implications for profitability? (5 marks);b) In your opinion, are marketing expenditures a fixed cost, variable cost, or mixed;cost to The Coca-Cola Company? Give justification for your answer. (5 marks);c) Which of the two measures cited for measuring volume represents the activity;index as you learned in this topic? Why might Coca-Cola use two different;measures? (5 marks)


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