1) I need you to perform preliminary analytical procedures on the financial statements.
a. Calculate common-size financial statements and dollar amount and percent changes. I suggest you simply make a copy of your spreadsheet from your pro-forma financial statements that I asked you to prepare yesterday and remove the adjustment columns. Have there been any significant changes that we need to examine closer?
b. Calculate financial ratios. Assume the market value of the common stock is $24 million in both the current and prior years. Does anything jump out at you? In particular focus on:
i. Comparison in percentage growth in receivables to percentage growth in sales
ii. Comparison in percentage growth in inventories to percentage growth in sales
iii. Comparison in percentage growth in inventories to percentage growth in accounts payable
iv. Day sales in inventory
v. Day sales in accounts receivable
vi. What do you make of a firm’s stagnant stock price?
2. Write a brief memo (GA-4) highlighting what you believe are potential problem areas

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