Explain how financial managers use financial calculators, Microsoft Excel, and financial statements to measure the financial performance of a business entity.

PC-1.1: Engage in a team setting with professional integrity and respect.

Understanding the classification and definitions of financial statement accounts is a fundamental requirement in assessing business management. Assessment of financial data provides the quantitative measures allowing managers to use past and present data to make effective decisions.


In Part 1 of this Assessment, you will define and classify accounts into an Income Statement or Balance Sheet. In Parts 2 and 3 you will assume the role of a financial manager who has been tasked to report to senior management in an upcoming finance meeting. Senior management is particularly interested in learning the performance of the company in two particular areas. The first focus of your discussion with management, Part 2 of this Assessment, relates to the markup on Cost of Goods Sold (COGS). The second focus of your discussion with management, Part 3 of this Assessment, relates to capital structure.

Part 1

To properly measure financial statements managers must know account definitions and classifications. Using the accounts below, define each and classify each as an Income Statement or Balance Sheet account.

1. Cash
2. Notes payable/Short term debt
3. Inventory
4. Property, plant, and equipment
5. Long term note-debt
6. Stockholders equity
7. Interest and taxes
8. Sales
9. Cost of Goods Sold
10. Selling and general administrative expenses
11. Gross profit
12. Earnings before interest and taxes
13. Net income
14. Accounts receivable
15. Accounts payable

Before you move on to Part 2 and Part 3 below, you must first complete the following Excel Spreadsheet. You must complete the Income Statement tab and the Balance Sheet tab. Then, answer the following questions in Part 2 and Part 3 below.

Part 2

After completing the Income Statement, you should be able to measure a companys COGS and its effect on the Gross Profit Margin (GPM). Based on your assessment of the firms Income Statement, you are to report to senior management on these key components:

a. What is the markup on COGS?

b. Compare this companys markup to a COGS Industry Standard of 70%. What is the result?

c. Explain how the difference in this companys markup and industry markup rates affect profitability, or levels of the GPM?

Part 3

After completing the Balance Sheet in the Excel Spreadsheet hyperlinked above, you should be able to measure a companys capital structure. Based on your assessment of the firm’s Balance Sheet, you are to report to senior management on these key components:

a. What is the nature of this company’s capital structure? Include percentages in your commentary?

b. Compare this capitalization structure percent to an industry standard of 50%. What is the result?

c. To what extent is this company ‘leveraged’?

Minimum Submission Requirements

This Assessment should be in a separate Microsoft Word document. Use this template for your Assessment.

Respond to the questions in a thorough manner, providing specific examples of concepts, topics, definitions, and other elements asked for in the questions. Your paper should be highly organized, logical, and focused.

Your paper must be written in Standard English and demonstrate exceptional content, organization, style, grammar, and mechanics.

Your paper should provide a clearly established and sustained viewpoint and purpose.

Your writing should be well ordered, logical and unified, as well as original and insightful.

A separate page at the end of your paper should contain a list of references, in APA format. Use your textbook, the Library, and/or the internet for research.

Be sure to cite both in-text and reference list citations were appropriate and reference all sources. Your sources and content should follow proper APA citation style. Review the APA formatting and citation style resources found in the Writing Center. The Writing Center can be found in the Academic Success Center in the Academic Tools area of your course. (It should be in Times New Roman 12-point font, include correct citations, Standard English with no spelling or punctuation errors, and correct references at the bottom of the last page.)

If work submitted for this competency assessment does not meet the minimum submission requirements, it will be returned without being scored.

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