Game Card Financial Statements December 31, 2017

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Provide a comprehensive analysis of the financial statements for Game Card for the year ending December 31, 2017. The analysis should include an overview of the income statement, balance sheet, and cash flow statement. Discuss the key financial ratios that can be derived from the provided data, such as profitability ratios, liquidity ratios, and solvency ratios. Examine the financial health of the business, identifying strengths and potential areas of concern based on the given figures. Additionally, evaluate the company's cash flow management, considering the operating, investing, and financing activities. Conclude with insights into the company's financial stability and recommendations for future financial strategies based on the data presented.

Paper For Above instruction

The financial statements of Game Card for the year ending December 31, 2017, provide a detailed overview of the company's economic performance and financial position. This analysis will explore each component, interpret the key ratios, and assess overall financial health.

Income Statement Analysis

The income statement indicates that Game Card generated gross sales of $417,600, with returns and allowances amounting to $34,100, resulting in net sales of $383,500. The cost of goods sold (COGS) was $101,000, leading to a gross profit of $282,500. Additional income of $3,700 from interest brings the total income to $286,200. Expenses totaled $182,000, including salaries and benefits, utilities, rent, office supplies, insurance, advertising, website expenses, and taxes & licenses. Consequently, the net income for the year was $104,200.

From a profitability perspective, the net profit margin is approximately 27.2% ($104,200 / $383,500), indicating a healthy profit level relative to sales. The gross profit margin stands at around 73.7%, which suggests effective cost management in procurement and sales processes. The high gross margin indicates the business’s strong pricing power or cost control over inventory handling.

Balance Sheet Evaluation

The balance sheet reveals total assets valued at $184,000. The current assets include cash ($15,), accounts receivable ($5,), inventory ($114,), with fixed assets comprising $21, and other assets accounting for $27,. The assets are financed through liabilities, totaling $142, representing 77.2% of the assets, with the remaining $42,1 or 22.8%, representing net worth.

Notably, inventory constitutes a significant portion of the current assets—around 62.0%—which could indicate potential turnover issues or high holding costs. The company's liquidity position, with cash at $15, and an accounts receivable of $5,, suggests a need for effective cash management strategies to ensure operational liquidity.

The liabilities consist mainly of business loans, which account for 75,0% of total liabilities, with accounts payable and other debts accounting for the remainder. The high proportion of long-term debt may pose solvency risks if not managed properly, but it can also indicate growth financing strategies.

Cash Flow Analysis

The cash flow statement reflects robust cash management, with total cash inflows of $79,800 and outflows of $30,800 from investing activities. Operating cash flow, derived from net income adjusted for non-cash depreciation ($3,200) and changes in working capital, stands at $84,600, demonstrating healthy cash generation from core activities. Financing activities added $26,000, primarily from increases in long-term notes payable and term loans.

Beginning cash at the start of the year was $73,100, increasing to $152,900 at year-end, indicating strong liquidity and the capacity to meet short-term obligations and invest in future growth opportunities.

Financial Ratios and Business Health

Key financial ratios derived from the data include:

• Profitability: Net profit margin of 27.2%; return on assets (ROA) approximately 56.7% ($104,200 / $184,000)
• Liquidity: Current ratio approximately 1.34 (current assets $184,000 / current liabilities assumed as total liabilities $142,000)
• Leverage: Debt-to-equity ratio around 3.38 ($142,000 liability / $42,000 equity), indicating heavy reliance on debt financing

These ratios suggest that while the company maintains profitability and adequate liquidity, its high leverage could pose risks if earnings decline or interest rates rise.

Recommendations and Future Outlook

Considering the analysis, Game Card exhibits strong profitability and cash flow management, positioning it well for continued operations. However, the high inventory levels warrant review to optimize stock turnover, reducing holding costs. The company should also monitor its debt levels closely, balancing growth financing with manageable leverage ratios.

Future strategies may include diversifying revenue streams, further controlling costs, and enhancing cash reserves to cushion against market fluctuations. Implementing more efficient inventory management systems and exploring alternative financing options could strengthen the company's financial stability.

Conclusion

In summary, the financial statements portray Game Card as a profitable entity with healthy cash flows and manageable liquidity. The primary concerns revolve around high inventory and debt levels, which should be monitored and optimized. Strategic focus on operational efficiency, cost control, and prudent debt management will be essential to sustain growth and ensure long-term financial stability.

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