Great Service Cleaning and Maintenance Service – Statement of Income and Retained Earnings Years Ended December 31, 2013 and 2014 Service Contract

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Great Service Cleaning and Maintenance Service – Statement of Income and Retained Earnings Years Ended December 31, 2013 and 2014

Service Contract Revenues

9,700,000 – 2014

6,295,400 – 2013

Service Contract Costs

(7,503,100) – 2014

(4,957,800) – 2013

Gross Profit

2,196,900 – 2014

1,337,600 – 2013

General and Administrative Expenses

(896,000) – 2014

(756,000) – 2013

Operating Income

1,300,900 – 2014

581,600 – 2013

Gain on sale of equipment

59,900 – 2014

7,700 – 2013

Interest expense

(69,500) – 2014

(70,800) – 2013

Other expense

(9,600) – 2014

(63,100) – 2013

Income before taxes

1,281,700 – 2014

455,400 – 2013

Taxes

(451,700) – 2014

(300,900) – 2013

Net Income

830,000 – 2014

154,500 – 2013

Retained Earnings, Beginning Balance

1,057,500 – 2014

1,053,000 – 2013

1,887,500 – 2014

1,207,500 – 2013

Less: Dividends paid

0 – 2014

(150,000) – 2013

Retained Earnings, Ending Balance

1,887,500 – 2014

1,057,500 – 2013

  • Perform a financial ratio analysis of the company using the following ratios: (1) Gross profit margin, (2) Current ratio, and (3) Debt ratio. Find two other ratios to calculate.
  • Select significant lines from the financial statements and provide an observation of their trends (Is the account increasing or decreasing in value? What does this mean?)
  • Draw some conclusions based on your observations. For instance, why do you think the assets of the company went up from 2013 to 2014? What implications does this have? What follow-up questions do you have to ask the company’s management?
  • Support your observations with data and logic. Discuss what limitations exist with the informational material provided. What other material would be important to your trend analysis?
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