THE INCOME STATEMENT

Before you start the assignment, test your understanding of concepts covered in the assignment. It is not a graded quiz, but a tool for reviewing some key points. The tool can be used multiple times.

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.

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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.

  1. Show the computation of the three ratios.
  2. Comment on the purpose and information conveyed by each ratio.
  3. What did you learn about ABC Company by reviewing the three ratios?
  4. What is your conclusion about the profitability of the company?
  5. How successful is ABC Company relative to the industry average and leaders in the small specialty retail store industry? Write two paragraphs or more. Include ratios found in the IBIS database to support your conclusion.                                             SLP Assignment Expectations

Show the formulas for the computations. Two to three sentences are sufficient to respond to questions 1 through 4.

See above for question 5 instructions. Do not use an essay format.

Show sources when appropriate and APA format is suggested, but not required.

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