As of the end of Stage Six, it is the end of 2019 and the company has been in operation for five years. It is time to write your own MD&A, reporting on the company performance to investors. Your management team must prepare a report in the style of an MD&A discussing the company operational results and describing how the company expects to move forward. Prepare a report that is between 2,500 and 3,500 words in length for your investors. Discuss the business’s results, what you learned, how you adjusted operations, and how the business should operate in the future. You should use what you learned in stage five as a guide, but not as a template.
You will need to compare the results of the various years of financial statements using the statement analysis tools studied in class.
From the list of ratios below, select what you deem to be the three most important analytical ratios for understanding the company’s operations and discuss the company’s results.
Select one item from each of the income statement and the balance sheet and perform a horizontal analysis of those two line items. Discuss the findings of these analyses.
o You may NOT select: Gross Sales, Total Expenses, Net Income, Retained Earnings, Total Assets, or Total Liabilities + Stockholders’ Equity.
In addition to reporting on the company’s results, discuss why you selected your particular ratios and line items in order to give context to the discussion.
Ratios and financial statements:
Compute the following ratios for all five years, and present them in table format as appendix A to the paper: Gross Profit Percentage, Return on Sales, Return on Assets, Return on Equity, Working Capital, Current Ratio, Quick Ratio, Inventory Turnover, Asset Turnover, Accounts Receivable Turnover, Debt-to-Equity, Times-interest-earned, Earnings per Share, and the Dividend Payout Ratio. Please note that, in certain circumstances, some of these ratios will be inapplicable. If this is the case, simply note that they are “N/A” in your chart.
You must also include, as appendix B, a comparative income statement and a comparative balance sheet that cover each of the periods of operations ending December, 2015 through December, 2019. Please see your textbook, page A-22 for an example of a three year comparative income statement. Yours will be a five year comparison, but should be similar to that in the text.
Finally, present a table with the horizontal analyses you have performed. You do not need to compute a horizontal analysis covering each piece of every financial statement, only those lines items that you selected as most important in reviewing the business results. The tables and comparative financial statements do not count towards the paper length requirement
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