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FIN 550 Group Case 2

1. CompU has been in business for 3 years now, and things are going well. The company has been able to expand its number of stores, and the companys sales and earnings have increased quickly. However, their CFO has decided that some additional analysis is required to determine the companys strengths and weaknesses. As a financial analyst with the company, the CFO has asked you to perform the following tasks:

1. Using Excel and the following income statement for 2022 and balance sheets for 2021 and 2022, prepare a statement of cash flows for 2022.

1. Using the financial statements and industry average ratios below, develop a complete time series and cross-sectional analysis of CompUs financial condition for 2021 and 2022. Calculate all of the ratios in the list of industry average ratios.

1. Prepare common size balance sheets and income statements for 2021 and 2022.

1. Construct a DuPont analysis for both CompU and the industry for 2021 and 2022.

1. After analyzing the data, write a short report (1 page) to the CFO with your conclusions regarding the companys strengths and weaknesses, its performance as compared to the industry, and your recommendations. Include a discussion of the changes in CompUs cash position during 2022. How has the company financed its growth? What areas of CompUs operations are in greatest need of immediate attention? Are there any changes you would recommend making? Prepare a planned course of action for the solution of the firms most pressing problems.

Industry Average Ratios

Current ratio 2.00

Quick ratio 1.50

Inventory turnover 4.00

Average Collection period 45 days

Average payment period 60 days

Total asset turnover 1.00

Debt ratio 45.0%

Debt/Equity ratio 60.0%

Times interest earned 4.00

Gross profit margin 25.0%

Operating profit margin 5.0%

Net profit margin 2.0%

Return on total assets 3.0%

Return on equity 3.6%

Financial Leverage Multiplier 1.81

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