Identifying Contributing Factors

timer Asked: Nov 30th, 2017
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Question description

Using the analysis of the financial statements for a this well-known information technology company from the Unit 1 Individual Project, complete the following:

  • Further analyze the financial ratios and trend analysis to evaluate and make management decisions.
  • Develop a business decision that evaluates a growth or improvement opportunity for the company.
  • Using analysis, determine whether it should be accepted or rejected by the organization.
  • Prepare a strategic plan to the board of directors of the company that includes analysis of financial information and recommendations for increased profitability.
  • As part of your analysis, be sure to evaluate risks and opportunities as well as alternatives to the proposed plan.

Note: Some content may be included from your Week 1 ratio analysis. Deliverable Length: 1,750-2,000 words. Please include references.

Candace Dease CTU Online ACCT650-1704B-01 Unit 1 – Individual Project Professor: M. Huber November 23, 2017 Journal entries for the month of May Date Particulars Debit Cash a/c 400000 Credit May 1 To Capital Stock a/c 400000 [Issue of Capital Stock for cash] Equipment a/c 300000 To Cash a/c 100000 To Note Payable a/c 200000 [Purchased equipment partly for cash and partly on account] Prepaid Rent a/c 15000 To Cash a/c 15000 [Rent paid in advance for three months] 4 Salaries Expense a/c 27000 To Cash a/c 27000 [Salaries forr the month of May paid in cash] 8 Office Supplies a/c To Accounts Payable a/c [Office Supplies purchased on credit] 4200 4200 15 Cash a/c 47000 Accounts Receivable a/c 48100 To Sales a/c 95100 [Fees earned partly received in cash and partly on account] 18 Office Supplies a/c 1700 To Accounts Payable a/c 1700 [Purchased Spare parts on account] 23 Cash a/c 22000 To Accounts Receivable a/c 22000 [Realization of accounts receivable] 26 Salaries Expense a/c 27000 To Cash a/c 27000 [Salaries for the month of May paid in cash] 27 Accounts payable a/c 1700 To Cash a/c 1700 [Cash paid to accounts payable/ 28 Dividends a/c (40000 * 10/100) 4000 To Dividend Payable a/c 4000 [Dividend of 10 cents per share has been declared] 29 Utilities Expense a/c 985 To Cash a/c 985 [Utilities expense paid in cash] 31 Unexpired Insurance a/c 24000 To Cash a/c 24000 [Purchase of insurance policy for cash] Cable Expense a/c 684 To Cash a/c 684 [Cable Expense paid in cash] Cash a/c 86300 Accounts Receivable a/c 34400 To Sales a/c [Fees earned partly received in cash and partly on account] 120700 2 Unadjusted Trial Balance Debit Cash 358931 Capital Stock Equipment 400000 300000 Note Payable 200000 Prepaid Rent 15000 Salaries Expense 54000 Office Supplies 5900 Accounts Payable Accounts Receivable 4200 60500 Sales Dividend Credit 215800 4000 Dividend Payable 4000 Utilities Expense 985 Unexpired Insurance 24000 Cable Expense 684 824000 824000 3 Adjusting Entries Rent Expense a/c 5,000 To Prepaid Rent a/c (15000 * 3/12) 5,000 [Advance payment covered three months] Interest Epense a/c (200000 *5%) 10000 To Interest payable a/c 10000 [Annual Interest due] Depreciation a/c (300000/5 * 1/12) 5000 To Accumulated Depreciation a/c 5000 [Equipment depreciated on straight line method] Office Supplies a/c 440 To Income Summary 440 [Office Supplies estimation] Salaries Expense a/c To Salaries payable a/c [Salaries earned at the end of month] 9642 9642 4 Adjusted Trial Balance Debit Interest Expense 10000 Interest Payable 10000 Rent Expense 5,000 Depreciation 5,000 Accumulated Depreciation Cash 5000 358931 Capital Stock Equipment 400000 300000 Note Payable 200000 Prepaid Rent 10,000 Salaries Expense 63642 Office Supplies 5900 Accounts Payable Accounts Receivable 4200 60500 Sales Dividend Credit 215800 4000 Dividend Payable 4000 Utilities Expense 985 Unexpired Insurance 24000 Cable Expense 684 Salaries Payable 9642 848642 848642 5 Balance Sheet for the year ended May 31, 2015. Particulars Amount Amount Current Assets Cash 358931 Accounts Receivable 60500 Prepaid Rent 10,000 Unexpired Insurance 24000 Office Supplies 440 Total Current Assets 453,871 Long Term Assets Equipment 300,000 Less: Accumulated Depreciation 5,000 Net Fixed Assets 295,000 Total Assets 748,871 Liabilities Current Liabilities Accounts Payable 4,200 Interest Payable 833.33 Salaries Payable 9642 Dividends Payable 40,000 Total Current Liabilities 54,675 Long Term liabilities 200,000 Total 254,675 Capital stock 400,000 Profit for the period 94,196 Total Liabilities 748,871 Income Statement for the year ended May 31, 2015. Particulars Amount Sales Amount 215,800 Expenses Salaries expenses 63,642 Office Supplies 3,760 Repair Expense 1,700 Utilities Expense 985 Dividends 40,000 Cable expenses 684 Rent 5,000 Interest Expense 833.33 Depreciation expense 5,000 Total Expenses 121,604.33 Net Income 94,196 Retained Earnings Statement Particulars Beginning retained earnings Add: net income for the year Less: Dividends paid Ending Retained earnings Amount($) 134,196 40,000 Amount($) 94,196 94,196 Post closing Trial balance Particulars cash Accounts receivable Prepaid rent Unexpired insurance Office supplies equipment Accumulated depreciation: equipment Notes payable Debit($) 318,931 60,500 10,000 24,000 440 300,000 Credit($) 5,000 200,000 Accounts payable Interest payable Salaries payable Capital stock Retained earnings Totals 4,200 833 9,642 400,000 94,196 713,871 713,871 Profitability ratios Profit margin ratio Net income sales Profit margin ratio Amount($) 134,196 215,800 62% Return on assets Net income Total assets Return on assets 134,196 713,871 19% Return on equity Net income 134,196 equity 494,196 Return on equity 27% Net Profit Margin Ratio = Net Income/Net Sales =134,196/215,800*100%=62% Return on assets=Net income/total assets = 134,196/713,871*100%=19% Return on equity= NET INCOME/equity =134,196/496,196=27% Liquidity ratios Current assets Current assets Current liabilities Current ratio Amount($) 413,871 214,675 1.93 Quick ratio Quick assets Current liabilities Quick ratio 379,000 214,675 1.77 Cash + securities Current liability Cash ratio 318,931 214,675 1.49 Current Ratio= CA/CL 413,871/214,675=1.93 QUICK RATIO=quick assets/current liabilities 379,000/214,675=1.77 Cash ratio= cash+securities/current liabilities 318,931/214,675 Solvency ratios Debt to equity ratio debt equity Debt to equity ratio Amount($) 214,675 494,196 0.43 Equity ratio Total equity Total assets Equity ratio 494,196 713,871 0.69 Debt to equity ratio=debt/equity =214,675/494,196=0.43 Equity ratio =equity/total assets =494,196/713,871=0.6 References HP. (n.d.). Retrieved from

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School: Carnegie Mellon University

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This paper will focus on analyzing the financial ratios of the Hewlett-Packard Company which is
commonly referred to as the HP Company. This company is a technology corporation that split
into two separate companies in the year 2015: that is the Hewlett-Packard's computer and printer
business and the Hewlett Packard Enterprise, which is basically an enterprise-focused product and
service organization.
Financial analysis is a key factor of consideration by all investors prior to investment. They are
therefore crucial for making the management decisions by the managers. Financial analysis is
basically referred to as the process of evaluating projects, businesses, budgets and other entities
related to finance as to find out their level of performance and suitability. The Quantitative
financial analysis of the business will involve the use of financial ratios so as to evaluate figures
such as sales revenue, profit margins or return on assets (ROA) so as to enhance decision making
in respect to funds within an organization. The investors of the HP company conduct, financial
and quantitative analysis before investing so as to determine whether the company is stable,
solvent, liquid or profitable enough to secure and warrant a monetary investment. It is important
to note that when looking for a specific company, a financial analyst conducts analysis by
examining the company’s balance sheet, income statement, and cash flow statement. (Brigham,
Eugene F., and Ehrhardt, 2013)
These managers and investors analyze the company’s financial data by calculating ratios from the
data and comparing them with the company’s own historical performance or against those of other
companies in the same industry. These will help in making the management decisions.
Liquidity ratios.

Liquidity ratios are used by the investors to measure the company’s ability to meet its short-term
maturing obligations as and when before due. The lower the ratio, the higher the liquidity risk and
vice versa. Failure to meet short-term liabilities due to lack of liquidity may lead to poor
creditworthiness, litigation by creditors and insolvency. The liquidity ratios r...

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