The Working Capital Ratio Is Mainly Used by Management Analysis

Ratio analysis is a type of financial statement analysis used to obtain a quick indication of an organization’s financial performance in various key areas. This assignment will measure your understanding of ratio analysis and will mainly focus on the content of chapters 4-7 and 9 from the Accounting 302 course and the corresponding learning outcomes.

Please note that you are required to complete all four of the following problem sets. You will need to utilize correct formulae, including headings and to show how calculations are done. Before beginning the assignment, please read the rubric carefully to understand the expectations and how your work will be graded.

Problem Sets

Problem #1

Refer to Dino’s information below and calculate the following ratios: Working capital ratio, quick ratio/acid test, earnings per share, price-earnings ratio, debt-equity ratio, and return on equity. Clearly provide each formulae, numbers and work associated, along with the answers.

For each ratio you calculated, provide an analytic statement in which you comment on how the ratio can affect specific decisions that need to be made within the organization.

Notes:

• Each statement must be at least one full paragraph, explaining the ratio results in isolation along the scale, then application to the specific business.
• Specifically include throughout your analyses, decisions regarding inventory management, depreciation of company assets, employee wages, government taxes, and investment prospects.

Problem #2

1. Using your own explained, numerical, practical examples, differentiate between periodic and perpetual inventory systems. You may apply your examples to the case of Dino’s After School.
2. Using your own explained, numerical, practical examples differentiate between LIFO, FIFO, and Weighted Average as forms of inventory valuation.
3. On April 12, 2017 Dino’s After School purchased $6,000 in inventory. Sales began to slow-down, so on May 12 they purchased only $2,000 worth of inventory. In June, with the start of summer when more customers are purchasing their inventory, they purchased $9,000 worth of inventory – June 20, 2017. If they had $4,780 of inventory remaining at the end of the first quarter, and sold $17,500 worth of inventory during the second quarter:

• What is the ending inventory for Dino’s After School at the end of June, 2017?
• If there was no ending inventory from the first quarter, with the same levels of sales, what would have been the cost of goods sold during the second quarter?

Problem # 3

Dino’s After School has an asset, a workstation where customers can find school homework assignments and hints for the correct answers. Its original cost was $12,700 and it has a salvage value of $1, 270 and 7 years of useful life.

1. Calculate the annual depreciation expense under the straight-line method.
2. Assume depreciation rate under the Double Declining Balance Method to be 30%, then calculate the annual depreciation for each year (using the Double Declining Balance Method), and find the book value of the asset at the end of the 7th year
3. Explain how the depreciation amount is included on the balance sheet, and why it is needed for the balance sheet. (50-100 words)

Problem # 4

Explain, in your own words, the concepts of adjustments and closing entries as covered in the Accounting 302 course. In your explanations, use examples (with numbers) to demonstrate your understanding of the concepts. For this assignment, please include 1-3 sentences discussing the relationship between the two concepts.