SAMPLE CASE STUDY: ACCOUNTING ANALYSIS & DECISION MAKING

CASE STUDY SITUATION

Februn is a small corporation which sells Party Supplies. Felix and Brunhilde began their small business
10 years ago. The business has now outgrown the original owners. They have incorporated and will now
seek additional financing through additional stockholders or through creditors. Given the data shown
below, what additional steps should the management of Februn make to properly document the
operations and to prepare for additional financing?


Dec 31 2010

year ending 2010
Cash

20000

Sales

1,000,000

Inventory

50000

Cost of Goods

500000

Receivables

30000

Administrative exp

100000
Office Building and
warehouse 150000

Interest on loan

2000

Long-term loan

50000

Tax rate

35%


THINGS TO CONSIDER

Analyze major ratio categories of Februn. Liquidity, Leverage, Efficiency, Return . What are the
strengths and weaknesses of Februns current situation?
What numbers are missing?
Which of the ratio categories is impacted by levels of inventory? Assuming the company uses LIFO
and the economy is experiencing an inflationary climate.
Realizing that Februn is using straight-line depreciation, what impact is this decision having on
expense control and asset efficiency?
What are some areas of the Februn organization areas that need to have improved documentation or
potential auditing?
Describe any other recommendations you might make to the owners and the creditors of Februn.

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