Financial Statements

Purpose of AssignmentThis activity helps students recognize the significant role accounting plays in providing financial information to management for decision making through the evaluation of financial statements. This experiential assignment requires students to use ratios to evaluate and analyze a company’s liquidity, solvency, and profitability.Two-Rivers Inc. (TRI) manufactures a variety of consumer products. The company’s founders have run the company for thirty years and are now interested in retiring. Consequently, they are seeking a purchaser, and a group of investors is looking into the acquisition of TRI. To evaluate its financial stability, TRI was requested to provide its latest financial statements and selected financial ratios. Summary information provided by TRI Document presented below.Required:a. Calculate the select financial ratios for the fiscal year Year 2. (use MS word or excel but excel is more recommended)b. Interpret what each of these financial ratios means in terms of TRI’s financial stability and operating efficiency.

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Ratio analysis
FINANCIAL STATUS
Profit margin 13.42%
Gross profit (%) 22.77%
Return on total assets 30.67%
Return on owner’s equity 48.09%
EFFICIENCY
Inventory turnover 3.142857
Selling period 116.1364
Account receivable turn over 10.16393
Collection period 35.91129
LIQUIDITY
Current ratio 2.048193
Quick ratio 0.650794
Debt ratio 48.82%
Interest coverage 5.622222

(586 words)