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Part 2: Financial Statement Analysis:

As the accountant for the company, you will need to write a memo to the owner making an analysis of the financial position at December 31^st. Make your analysis of the health of the company using the following calculations & ratios:

Working Capital

Current Ratio

Profit Margin

Debt to Equity

Calculate the ratios and explain what they tell us about the company - how can we use them to assess the health of the company. (Ratios can be found throughout the text and in Chapter 17.)

How does the company compare to others in the industry on the ratios? Assume that the industry average for the ratios is as follows:

Current Ratio 2.5

Profit Margin 38%

Debt to Equity 10%

Last, the owner is thinking about incorporating the business. Give her some advantages and disadvantages of doing so.

Use proper memo format for this portion of the assignment. Complete your memo in Word. Use your most professional business writing, correct grammar and spelling, and be thorough but brief. The memo should be approximately 1 1.5 pages.

Use these Check Figures to see if your calculations are accurate. Use these numbers to prepare your ratio analysis.

Total Debits (and credits) on Unadjusted Trial Balance = 160,250

Total Debits (and Credits) on Adjusted Trial Balance = 164,250

Net Income on Income Statement = 5,275

Ending Capital (on Stmt of Equity) = 140,725

Total Assets on Balance Sheet = 153,275

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I am completly lost in how to write this memo. Please help me. If done i will rate! Thank you so much!

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