SLP ACC201 Module 3
The Income Statement
The purpose of this SLP is to apply ratio analysis to assess the financial health of ABC Company. Use the income statement presented in the case during this module to compute general or overall profitability ratios. Compute three ratios using at least one of the income statement accounts for each ratio. Some profitability ratios include both income and balance sheet accounts. The balance sheet accounts are found in module 2.
Assume that ABC Company is a small specialty retail store. Ratios are relevant when assessed over time or across companies. IBIS is a comprehensive resource containing market research and statistics, which can be used to compare ABC Company to the industry and leaders in the industry.
Required
Part 1
First, choose three ratios from the background materials. ABC is a simple organization (see income statement in case), so pick profitability ratios for which sufficient financial data is available. Verify that at least one of the ratios is included in the IBISWorld database.
Identify the name of the ratio, the formula, and show your computations.
Part 2
Next, respond to the following questions.
- Comment on the purpose and information conveyed by each ratio.
- What did you learn about ABC Company by reviewing the three ratios?
- What is your conclusion about the profitability of the company?
- How successful is ABC Company relative to the industry average and leaders in the small specialty retail store industry? Comment from a profitability perspective. Write two paragraphs or more. Include ratios found in the IBIS database to support your conclusion.
Please see attached files for complete assignment details.
