Comprehensive Financial Statement Analysis Problem

Please see Problem 14-10 on page 552 in our textbook. You are to respond to parts a, b, c, and d as shown

under the required section of the problem. Your paper should be professional in appearance.

Here is problem 10-14 from “managerial accounting by James Jiambalvo” on Page 552.
PROBLEM 14-10. Comprehensive Financial Statement Analysis [LO 1,2,5,6,7] Marty “Monk” Fisher owns the largest
motorcycle dealership in southern Ohio. Recently, he was approached by Bob Sherman, founder of Mandrake
Motorcycles, and offered the opportunity to be the sole distributor of Mandrake bikes in the state.
Acceptance of the offer will require Monk to open a dedicated Mandrake showroom and repair facility and,
obviously, stock Mandrake cycles and parts. Monk is quite impressed by the Mandrake product, but before
making a major investment, he wants to be confident that the company will be around for the long haul.
Accordingly, he has asked you to analyze the audited financial statements of Mandrake for the previous two
a. Prepare a horizontal and a vertical analysis of the 2012 and 2011 financial statements.
b. Calculate the following ratios for 2012 and 2011: return on assets, gross margin percentage, receivables
turnover, days’ sales in receivables, inventory turnover, days’ sales in inventory, debt to equity, and times
interest earned.
c. Based on your analysis in parts a and b, comment on any matters that Monk should probe in an upcoming
meeting with Bob Sherman from Mandrake.
d. Based on the limited information available, do you think Monk should open a Mandrake showroom?



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