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##### Instructions

##### Cookie Creations (Chapter 18)

This assignment is a continuation of the Cookie Creations case study.

For this assignment, you will apply what you have learned from Chapter 18

as an introduction to the financial analysis. This assignment will allow you

to practice what you have learned so far.

Natalie and Curtis have comparative balance sheets and income statements

for Cookie & Coffee Creations, Inc. They have been told that they can use

these financial statements to prepare horizontal and vertical analyses, to

calculate financial ratios, to analyze how their business is doing, and to

make some decisions they have been considering. Below, you are provided with

the balance sheet and income statement of Cookie & Coffee Creations

Inc. for its first year of operations; the year ended October 31, 2021.

Review the calculations below, and then review the additional case

information to calculate the ratios.

Review the additional case information below.

Natalie and Curtis are thinking about borrowing an additional $20,000 to

buy more equipment. The loan would be repaid over a 4-year period. The terms

of the loan provide for equal semi-annual installment payments of $2,500 on

May 1 and November 1 of each year, plus interest of 5% on the outstanding

balance. Dividends on preferred stock were $1,400. Since this is the first

year of operations and the beginning balances are zero, use the ending

balance as the average balance where appropriate.

Complete the tasks listed below.

- Calculate the following ratios:
- current ratio,
- accounts receivable turnover,
- inventory turnover,
- debt to assets ratio,
- times interest earned,
- gross profit rate,
- profit margin,
- asset turnover,
- return on assets, and
- return on common stockholders’ equity.

- Comment on your findings from item “a.”
- Based on your analysis in items “a” and “b”, do you think a bank would

lend Cookie & Coffee Creations Inc. $20,000 to buy the additional

equipment? Explain your reasoning. - What alternatives could Cookie & Coffee Creations Inc. consider

instead of bank financing?

Complete your calculations for item “a” in either an Excel spreadsheet or a

Word document. If you complete item “a” in an Excel spreadsheet, complete

items “b–d” in a Word document, and submit the Excel spreadsheet and the Word

document in Blackboard. If you complete items “a–d” in a Word document,

submit your calculations to item “a” and your responses for items “b–d” in a

single Word document in Blackboard. Your total submission should be a

minimum of two pages in length, including your calculations. Include at

least two references. Adhere to APA Style when creating citations and

references for this assignment.

##### Resources

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