Gilligan Island Inc., provides tropical vacations. The company sells vacations 30 days in advance. Your boss has no idea of the financial condition for some time and, therefore, is asking you to help with a more current assessment of the company’s position for his/her meeting with the CEO. Below you will find a series of accounts that represent the trial balance of the business firm. These accounts encompass both income statement and balance sheet accounts. Required: Prepare (using Excel) a proper form income statement and balance sheet for the company. Make sure to create a proper form statement. Make sure you include these statements in your PowerPoint with speaking notes. 2009 2010 2011 Accumulated depreciation 176,580 209,050 242,725 Retained earnings 337,602 510,731 648,528 Sales 3,702,480 3,961,654 3,981,462 Cash 35,750 62,635 86,595 Bonds payable 421,000 334,000 325,000 Accounts receivable 246,580 293,430 349,182 Depreciation expense 31,265 32,470 33,675 Common stock shares outstanding 80,000 80,000 80,000 Plant and equipment, at cost 984,021 1,026,880 1,151,210 Taxes 79,484 93,223 74,198 Accounts payable 62,685 116,696 188,569 Common stock, $1 par 75,000 75,000 75,000 Inventory 185,652 243,117 312,622 Prepaid expenses 6,575 21,525 26,325 Cost of goods sold 2,665,786 2,879,049 2,936,630 Interest expense 12,532 10,325 10,235 Selling and administrative expenses 765,800 773,458 788,927 Marketable securities 12,545 23,564 24,153 Other current liabilities 123,256 150,674 195,265 Capital paid in excess of par (common) 275,000 275,000 275,000 Based on the financial statements that were prepared with this data, complete the following financial ratio calculations and provide a narrative discussion of these results as compared to industry averages (provided.) Ratios required: Ratio Industry Average 1. Profit margin 3.2% 2. Return on assets (use ending assets) 6.0% 3. Return on common equity (use ending common equity) 15.6% 4. Receivable turnover (use ending receivables) 8.5 x 5. Inventory turnover (use ending inventory) 12.0 x 6. Fixed asset turnover (use ending fixed asset balance) 5.75 x 7. Total asset turnover (use ending assets) 1.89 x 8. Current ratio 3.10 9. Quick ratio 1.40 10.Debt to total assets (use ending assets) 37.0% Your solution should include the required ratios for each year and then provide speaking notes regarding the results as they compare to the industry averages. This analysis should discuss whether or not company is better or worse than the industry average but it should not stop there. You should also include a speaking notes as to why or how the difference can be explained, i.e., the reason for the variance. The final slide is to be providing a recommendation to improve the finances of the company.
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