# BUSN460 Individual Financial Analysis Project

BUSN460 Individual Financial Analysis Project

Find these
ratios, providing the following information for each; Formula (express the
ratio in words), a detailed calculation (actual numbers from financial
statements used for the calculation), final number (final result of the
detailed calculation) and explanation of why ratio is important:

Efficiency Ratio:
Receivable Turnover

Financial Leverage Ratio:
Debt/Equity Ratio

Liquidity Ratio: Current
Ratio

Liquidity Ratio: Quick
Ratio

Profitability Ratio: Return
on Equity

Profitability Ratio: Return
on Assets

Profitability Ratio: Gross
Margin %

Profitability Ratio: Net
Profit Margin

Financial information has
been attached.

Assumptions:

At the beginning of 2009, CanGo purchased the online
gaming company. This purchase was for cash, paid for through the proceeds
of the IPO and results in goodwill.

90% of the online book sales comes from JIT, the other
10% through the inventory which CanGo possesses. 100% of the CD/DVD/MP3
come through CanGo inventory. The result is that 80% of ALL sales is JIT
and 20% is inventory.

There is one warehouse for shipping of books and one
plant for manufacturing.

There are three divisions: a CD/DVD/MP3 division, an
online gaming division and a books division. All manufacturing takes place
in the CD/DVD/MP3 division.

The IPO took place at the beginning of 2009.

The CD/DVDs were customized beginning in 2008. The MP3
players were built beginning in the start of 2009.

The online gaming company was purchased for \$30,000,000
and both Elizabeth and Andrew initiated the process.

The company began in 2006, has a VC infusion in 2007
and 2008. It showed a profit in 2008 and 2009. Its only profitable
division is the online book sales division.

It has some type of international operations, hence the
need for a “translation gain or loss” in owner’s equity.

It has an extraordinary loss from fire and a sale of a
segment of its business in 2009.

Balance
Sheet

ASSETS

December 31, 2009

Cash

\$20,900,000

Marketable Securities

\$117,000,000

Accounts Receivable

\$33,000,000

Less: Allowance for Bad Debts

\$(880,000)

Net Accounts Receivable

\$32,120,000

Inventory

Raw Materials

\$2,000,000

Work-in-process

\$1,000,000

Finished Goods

\$5,000,000

Inventory Purchased for Resale

\$24,000,000

Total Inventory

\$32,000,000

Plant, Property and Equipment

\$6,700,000

Less: Accumulated Depreciation

\$(320,000)

Net Plant, Property and Equipment

\$6,380,000

Prepaid Expenses

\$200,000

Goodwill and Other Purchased Intangibles

\$28,000,000

Less: Amortization

\$(700,000)

Net Goodwill and Other Purchased Intangibles

\$27,300,000

Total Assets

\$235,900,000

LIABILITIES AND OWNERS’ EQUITY

Accounts Payable

\$22,000,000

\$11,800,000

Other Liabilities and Accrued Expense

\$1,400,000

Current Portion of Long-Term Debt

\$2,300,000

Long Term Debt

\$57,400,000

Preferred Stock, \$100 par value per share,

100,000 authorized, 0 shares issued and
outstanding

\$0

Common Stock, \$1 par value per share,

250,000,000 shares authorized,
13,000,000 shares

issued, 12,900,000 outstanding

\$13,000,000

Additional Paid-in-Capital in excess of par value, Common Stock

\$117,000,000

Treasury Stock

\$(1,000,000)

Retained Earnings (less Cash Dividends Paid)

\$12,000,000

\$11,000,000

Total Liabilities and Owner’s Equity

\$235,900,000

Income Statement

December 31, 2009

December 31, 2008

Sales Revenues

\$51,000,000

\$10,300,000

Less: Sales Returns

\$(1,000,000)

\$(300,000)

Net Sales Revenues

\$50,000,000

\$10,000,000

Less: Cost of Goods Sold

\$(9,000,000)

\$(4,000,000)

Gross Profit

\$41,000,000

\$6,000,000

Operating Expenses:

\$(26,000,000)

\$(3,000,000)

Depreciation

\$(160,000)

Salaries and Wages

\$(1,700,000)

\$(1,400,000)

Product Development

\$(4,000,000)

\$(1,200,000)

Merger and Acquisition Related Costs, including

Amortization of Goodwill and Other
Intangibles

\$(700,000)

\$0

Total Operating Expenses

\$(32,560,000)

Income from Continuing Operations Before Income Taxes

\$8,440,000

Less: Income Taxes at 35%

\$(2,954,000)

Income from Continuing Operations

\$5,486,000

Discontinued Operations:

Income from Operations of Discontinued Division

(less applicable income taxes)

\$350,000

Loss on Disposal of Discontinued Division

(less applicable income taxes)

\$(150,000)

Total Gain from Discontinued Operations

\$200,000

Extraordinary Items:

Loss from fire (less applicable income taxes)

\$(200,000)

Net Income

\$5,486,000

Divisional Revenues

Books

\$15,000,000

\$7,000,000

Online gaming

\$25,000,000

Customized MP3/CD/DVD

\$10,000,000

\$3,000,000

Customized MP3/CD/DVD Inventory at end of 2009

\$8,000,000

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