CCC13 CONTINUING COOKIE CHRONICLE
(a)
2020
2019
1.
Current ratio
2.
Debt to assets
3.
Gross profit rate
4.
Profit margin
5.
Return on assets
$37,002
= 36.2%
$42,000
= 69.2%
6.
Return on common stockholders’
equity
CONTINUING COOKIE CHRONICLE (Continued)
(b)
COOKIE & COFFEE CREATIONS INC.
Income Statement
For The Year Ended October 31
2020
2019
Difference
Horizontal
Analysis
Sales
Operating expenses
Salaries & wages expense
Depreciation expense
Other operating expenses
$485,625
147,979
17,600
48,186
$462,500
146,350
9,100
42,925
$23,125
1,629
8,500
5,261
5%
1%
93%
12%
CONTINUING COOKIE CHRONICLE (Continued)
(c)
COOKIE & COFFEE CREATIONS INC.
Income Statement
For The Year Ended October 31
2020
Vertical
Analysis
2019
Vertical
Analysis
Sales
Cost of goods sold
$485,625
222,694
100.00%
45.86%
$462,500
208,125
100.00%
45.00%
(d) Sales have increased by 5% from 2019 to 2020; however the cost of
goods sold increased by 7%. This resulted in a decrease in gross profit
as a percent of sales from 55% in 2019 to 54.1% in 2020. This analysis
CONTINUING COOKIE CHRONICLE (Continued)
(d) (Continued)
Salaries and wages expense only increased 1%. However, other
operating expenses increased by 12% in comparison to the 5% growth
in sales during the year. It would appear that Natalie and Curtis need to
do a better job managing other operating expenses.
(e) The impact on borrowing an additional $20,000:
Current ratio would decline slightly.
Debt to total assets ratio—Total liabilities would increase by $20,000;
CONTINUING COOKIE CHRONICLE (Continued)
(e) (Continued)
Return on assets—Net income would decrease (due to the additional
interest expense); total equity would remain the same causing this
ratio to decrease.
(f) The justification for the purchase of the additional equipment would be
the related increase in sales revenue. In this case, Cookie & Coffee