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Lakeside Case Exercise Template Essay

(a) Compute the financial ratios listed in Exhibit 3-2 for Lakeside for the years ended December 31, 2010 and December 31, 2011. Comment on any large fluctuations, unusual fluctuations, or lack of expected fluctuations. Also, give an overall conclusion as to the significance of the change in Lakeside’s liquidity, solvency, and profitability positions from 2010 to 2011. Use the following format. [Use Case3.xls for a spreadsheet to compute the ratios].

Ratio
2010
2011
Significance of Change
Current
1.35
1.35

No significant fluctuation, indicating a stable liquidity position (based on this measure of liquidity)

Average Days Inventory on Hand

Average Days to Collect Receivables

Debt-to-Total Assets Ratio

Times Interest Earned

Profit Margin

Return on Assets

Return on Equity

Overall Conclusion:

(b)Compare the year 2011 financial ratios computed for Lakeside above to the industry average ratios included in Exhibit 3-3. Comment on any large fluctuations, unusual fluctuations, or lack of expected fluctuations. Also, give an overall conclusion as to the significance of the difference between Lakeside’s liquidity, solvency, and profitability positions in 2011 and the industry average positions. Use the following format.

Ratio
Industry Ave.
Lakeside 2011
Significance of Change
Current

2.16
1.35
Lakeside is below the industry average. This may indicate short-term solvency problems

Average Days Inventory on Hand

Average Days to Collect Receivables

Debt-to-Total Assets Ratio

Times Interest Earned

Profit Margin

Return on Assets

Return on Equity

Overall Conclusion:

(c)Scan each of the financial statements and the trial balances included in Exhibits 3-4 through 3-7. Comment on any unusual accounts, account balances, or large, unusual, or lack of expected fluctuations from the previous year. You should find at least 10 items. [Note: you may have more than one “finding” for each procedure]. Use the following format:

Procedure
Findings
Significance
Scan the trial balance.
1. A debit balance appears in the “Allowance for Doubtful Accounts” account. 2.
1. Bad accounts may be increasing or a debit entry may have been misposted. 2.
Scan the income statement.

Scan the balance sheet.

Scan the statement of cash flows.


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