Description
Client One – Chester, Inc. (Financial Statements and Analysis). Please carefully read the attached document and answer all the questions.
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Explanation & Answer
Attached.
Financial Statements and Analysis
Name
Course
Institution
Instructor
Date
To:
Chester Company Board of Directors, Chester
From:
Date: 20th June 2018
RE:
Financial Statements and Analysis
Chester Company is a corporation based in Chester and Warrington. The company is one
of the largest publicly traded consumer service companies that offer athletic wear such as shoes
clothing and accessories. The firm provided a trial balance for three years; 2013, 2014 which I
have used in the preparation of financial statements as well as calculation of ratios. I will
therefore highlight the vital areas that have been prepared in the financial statements as well as
compare the performance of the company to industry averages and one of its competitors. The
competition this case is Armor Inc. I will also discuss how the statements could be prepared
under International Financial Reporting Standards (IFRS).
Ratio Analysis
Different types of ratios are prepared to compare the performance of the company with
others in the same industry. If the ratios are properly calculated and interpreted, a firm finds
areas with gaps that need to be filed and where additional research is needed. They show if the
firm is heading in the right direction or changes need to be implemented. The ratios calculated
here are liquidity ratios, profitability rat as well as solvency ratios (Larson, Chiappetta, 2001).
The information below shows performance of the company in comparison to its competitor
Armor Corporation.
Liquidity Ratios
Liquidity ratios indicate the firm’s ability to meet its short term obligations when they fall
due more specifically using the current assets. Is is shown using the current and quick ratio. The
recommended current ratio is 2:1 (Larson et al. 2001). Chester's current ratio reduced from 2013
to 2015 moving from 2.41in 2013 to 1.74 in 2014. The quick ration of the company was...