BUSINESS FINANCE

Review of Financial
Statement
Preparation, Analysis,
and Interpretation
PART 7

MARITESS N. SAN VICTORES

Subject Teacher
 Motivation
• Review profitability and leverage ratios.
• What do we mean by liquidity and efficiency?
Recall the formula used in liquidity and efficiency
ratio.
Business cases are used to discuss certain issues
and problems of a specific company. You will
have to examine a business case and take the
point-of-view of the owners/managers in
analyzing the case. Use the ratios we previously
discussed: Liquidity, Profitability, Efficiency, and
Leverage
 Mechanics of the business case
• The class will be divided in groups
• Each group will discuss and analyze the business case
among their groups. You will then need to summarize
your analysis in an essay/paper. The paper will have
the following outline: Case Background/Story,
Analysis (including computations), and
Recommendation. The paper can be one to two
pages of yellow sheet or bond paper. They must do
this within 45 minutes.
• Groups will present their business case analysis,
findings and recommendations. Presentation time is
10 minutes for each group.
 Chloe’s Closet
Chloe Mendez owns a clothing company, Chloe’s Closet. She has a team of
tailors who work for 8 hours every day from Monday to Saturday. Demand
for her business is strong but there seems to be something preventing her
from meeting the demands of her customers.
Chloe sells to both big department stores and small boutique stores under
the brand Chloe’s Closet. Some brands also ask her to manufacture their
own designs. Business for Chloe has been good since it started last 2014.
In fact, despite the tough competition from cheaper manufacturers
abroad, she still manages to grow her customer base.
On December 4, 2015 Chloe received a billing statement from a raw material
supplier for an amount of PHP400,000 which will be due in 5 days. She is
also scheduled to pay her employees’ monthly salary of PHP70,000 the
following day. Upon checking her bank account, she only has a PHP67,000
balance. She knew she had exceeded her sales target last October and
November so she is wondering why she only has this amount of cash in
her bank account. Was her money stolen? Being a CPA, she checked the
bank statement and her financial records and found no mistakes.
Here is the latest financial statement of Chloe’s Closet
as of November 30, 2015:
Answer this question: What’s wrong with Chloe’s Closet?