Assignment 2 requirements:
1. For Assignment 2 you will find three files: the ABC financial statements; the Excel file “Spreadsheet ABC”; and the formula sheet.
2. Type your name and ID number in the “OBJ” tab of the “Spreadsheet -ABC” file. Identify the type of statement and/or auditor’s opinion and add it in cell A5 of the “BS” worksheet/tab. Possible choices: Internally Prepared, Compilation, Review, Audit –Unqualified, Audit –Qualified, Audit –Adverse, Audit –Disclaimer.
3. Transfer the amounts from the ABC balance sheet to the “BS” tab of the Excel file. Maintain the existing account categories in this file. Make sure that after you finish entering the data, the accounting equation is valid i.e. Total Assets = Total Liabilities and Total Stockholders Equity.
4. Transfer the data from the ABC income statement to the “IS” tab of the Excel file. Again, you should not change the existing categories in the file.
5. Then you need to create the common-size income statement (CSIS tab) and the common-size balance sheet (CSBS tab). This is known as vertical analysis and compares each amount with a base amount selected from the same year. The common size balance sheet shows each account on the balance sheet as a percentage of total assets for the same year. The common size income statement shows each account in the income statement as a percentage of net sales in the same year.
6. The final step will be to complete the ratio worksheet –”FR” tab using the formula sheet that you are given.
7. Finally, in a Word document summarize your findings regarding this company’s liquidity, leverage, and profitability. Which ratios indicate improvements in the associated categories, and which show deteriorations?
Just a couple of points of caution: first, you should not change the structure of the file i.e. alter the existing formulas, accounts, etc. In addition, you only need to be concerned with the years for which you are given data.