Conduct a financial analysis using 4 types of financial ratios for three year period (include numbers for your industry or children’s nest)?

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STATEMENT OF ASSETS, LIABILITIES AND STOCKHOLDER’S EQUITY

INCOME TAX BASIS

DECEMBER 31, 2019

ASSETS

CURRENT ASSETS
Cash $ 395,096
Employee Loan Receivable 3,526
Prepaid Expenses 60,869

Total Current Assets 459,491

PROPERTY AND EQUIPMENT, AT COST

,I
Leasehold Improvements 833,848

fl

Furniture, Fixtures & Toys 210,856
Vehicles 321,029
Equipment 259,482

Total 1,625,215
Less: Accumulated Depreciation (1,292,066)

Net Property and Equipment 333,149

OTHER ASSETS
Refundable Deposits 6,847
Non-Compete Agreements 11,944
Goodwill 11,944

Total 30,735
Total Assets $ 823,375

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STATEMENT OF ASSETS, LIABILITIES AND STOCKHOLDER’S EQUITY

INCOME TAX BASIS

December 31, 2019

LIABILITIES AND STOCKHOLDER’S EQUITY

CURRENT LIABILITIES
Employee Loan Payable

STOCKHOLDER’S EQUITY

Common Stock, $1 Par Value;
Authorized 5,000 Shares, Issued
and Outstanding 500 Shares

Retained Earnings-Income Tax Basis

Total Stockholder’s Equity

Total Liabilities and
Stockholders’ Equity

$ 2,643
–�–

500
820,232

820,732

$ 823,375

SEE ACCOMPANYING ACCOUNTANT’S COMPILATION REPORT

I
I

REVENUES

STATEMENT OF REVENUES, EXPENSES AND
RETAINED EARNINGS-INCOME TAX BASIS

FOR THE YEAR ENDED December 31, 2019

D ay Care Fees and Programs

EXPENSES (See Schedule)

EXCESS OF REVENUES OVER EXPENSES
BEFORE OTHER INCOME

OTHER INCOME

Auto Reimbursements

EXCESS OF REVENUES OVER EXPENSES

RETAINED EARNINGS, BEGINNING OF YEAR –
INCOME TAX BASIS

STOCKHOLDER DISTRIBUTIONS

RETAINED EARNINGS, END OF YEAR –
INCOME TAX BASIS

$ 4,508,662

$

(3,778,117)

730,545

5,396

735,941

728,403

644,112)

820,232

SEE ACCOMPANYING ACCOUNTANT’S COMPILATION REPORT

I

EXPENSES

STATEMENT OF REVENUES, E XPENSES AND
RETAINED EARNINGS-INCOME TAX BASIS

FOR THE YEAR ENDED December 31, 2019

Accreditation
Advertising
Bank Charges
Children’s Activities
Conferences
Contract Services
Depreciation
Director’s Fees
Dues and Subscriptions
Fire Safety
Gifts
Groceries
Insurance
Lawn Care
Legal and Accounting
Licenses
Loss on Fixed Asset Disposals
Maintenance and Repairs
Meals
Non-Compete Agreement and

Goodwill Amortization
Office Expense
Payroll Processing
Pest Control
Postage

Recruitment and Training
Rent
Salaries-Officers
Salaries-Other
Supplies
Taxes-Other
Taxes-Payroll
Telephone
Utilities
Vehicle Expenses

Total Expenses

$ 3,560
2,084

12,341
32,560

1,520
9,036

104,749
30,000

724
8,048
7,246

321,563
237,835

41,355
52,211

3,046
18,965

125,684
1,230

6,667
57,121
10,825

9,081
90

1,904
109,872
308,264

1,841,202
82,372

3,869
169,612

19,805
93,445
50,231

$ 3,778,117

SEE ACCOMPANYING ACOUNTANT’S COMPILATION RE PORT

..

STATEMENT OF ASSETS, LIABILITIES AND STOCKHOLDER’S EQUITY

INCOME TAX BASIS

DECEMBER 31, 2020

ASSETS

CURRENT ASSETS
Cash
Employee Loan Receivable
Prepaid Expenses
Deposits

Total Current Assets

PROPERTY AND EQUIPMENT, AT COST
Leasehold Improvements
Furniture, Fixtures & Toys
Vehicles
Equipment

Total
Less: Accumulated Depreciation

Net Property and Equipment

OTHER ASSETS

Refundable Deposits
Non-Compete Agreements
Goodwill

Total

Total Assets

$

$

223,566
2,883

57,477
5,000

288,926

865,507
199,801
321,251
253,108

1,639,667
(1,268,820)

370,847

6,847
8,611
8,611

24,069
683,842

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. ‘

STATEMENT OF ASSETS, LIABILITIES AND STOCKHOLDER’S EQUITY

INCOME TAX BASIS

December 31, 2020

LIABILITIES AND STOCKHOLDER’S EQUITY

CURRENT LIABILITIES
SBA Loan Payable
Payroll Tax Liability
Employee Loan Payable

STOCKHOLDER’S EQUITY

Common Stock, $1 Par Value;
Authorized 5,000 Shares, Issued
and Outstanding 500 Shares

Retained E arnings-Income Tax Basis

Total Stockholder’s Equity

Total Liabilities and
Stockholders• Equity

$

$

459,475
58,461

5,301
523,237

500
160,105

160,605

683,842

SEE ACCOMPANYING ACCOUNTANT 1 S COMPILATION REPORT

REVENUES

STATEMENT OF REVENUES, EXPENSES AND
RETAINED EARNINGS-INCOME TAX BASIS

FOR THE YEAR ENDED December 31, 2020

Day Care Fees and Programs

EXPENSES (See Schedule)

EXCESS OF REVENUES OVER EXPENSES
BEFORE OTHER INCOME

OTHER INCOME

Auto Reimbursements

EXCESS OF REVENUES OVER EXPENSES

RETAINED EARNINGS, BEGINNING OF YEAR –
INCOME TAX B ASIS

STOCKHOLDER DISTRIBUTIONS

RETAINED EARNINGS, END OF YEAR –
INCOME TAX B ASIS

$ 3,849,590

(3,188,019)

$

661,571

4,358

665,929

820,232

(1,326,056)

160,105

SEE ACCOMPANY ING ACCOUNTANT’S COMPILATION REPORT

EXPENSES

STATEMENT OF REVENUES, EXPENSES AND
RETAINED EARNINGS-INCOME TAX BASIS
FOR THE YEAR ENDED December 31, 2020

Accreditation
Advertising
Bank Charges
Children’s Activities
Contract Services
Depreciation
Director’s Fees
Dues and Subscriptions
Fire Safety
Gifts
Groceries
Insurance
Lawn Care
Legal and Accounting
Licenses and Taxes
Maintenance and Repairs
Meals
Non-Compete Agreement and

Goodwill Amortization
Office Expense
Payroll Processing
Pest Control
Recruitment and Training
Rent
Salaries-Officers
Salaries-Other
Supplies
Taxes-Payroll
Telephone
Utilities
Vehicle Expenses

Total Expenses

$ 2,215.
937

7,660
19,605

5,353
46,087
30,000

268
8,118
3,850

243,078
230,801

23,015
18,284

4,458
147,154

793

6,667
68,425
11,986

6,675
1,020

109,872
279,389

1,592,512
44,811

140,189
17,347
86,740
30,710

$ 3,188,019

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l

I
I’

..

STATEMENT OF ASSETS, LIABILITIES AND S TOCKHOLDER’S EQUITY

INCOME TAX BASIS

DECEMBER 31, 2018

CURRENT ASSETS
Cash

ASSETS

Employee Loan Receivable
Prepaid Expenses

Total Current Assets

PROPER TY AND EQUIPMENT, AT COS T
Leasehold Improvements
Furniture, Fixtures & Toys
Vehicles
Equipment

Total
Less: Accumulated Depreciation

Net Property and Equipment

OTHER ASSETS
Refundable Deposits
Non-Compete Agreements
Goodwill

Total

Total Assets

$ 325,834
810

55,056
381,700

754,004
207,055
356,510
246,978

1,564,547
(1,254,428)

310,119

6,846
15,278
15,278
37,402

$ 729,221

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STATEMENT OF ASSETS, LIABILITIES AND STOCKHOLDER’S EQUITY

INCOME TAX BASIS

December 31, 2018

LIABILITIES AND STOCKHOLDER’S EQUITY

CURRENT LIABILITIES
Employee Loan Payable

STOCKHOLDER’S EQUITY

Common Stock, $1 Par Value;
Authorized 5,000 Shares, Issued
and Outstanding 500 Shares

Retained Earnings-Income Tax Basis

Total Stockholder’s Equity

Total Liabilities and
Stockholders’ Equity

$ 318

500
728,403

728,903

$ 729,221

SEE ACCOMPANYING ACCOUNTANT’S COMPILATION REPORT

I

REVENUES

STATEMENT OF REVENUES, EXPENSES AND
RETAINED EARNINGS-INCOME TAX BASIS

FOR THE YEAR ENDED December 31, 2018

Day Care Fees and Programs

EXPENSES (See Schedule)

EXCESS OF REVENUES OVER EXPENSES
BEFORE OTHER INCOME

OTHER INCOME

Auto Reimbursements

EXCESS OF REVENUES OVER EXPENSES

RETAINED EARNINGS, BEGINNING OF YEAR –
INCOME TAX BASIS

STOCKHOLDER DISTRIBUTIONS

$ 4,471,223

(3,769,929)

701,294

5,301

706,595

664,831

643,023)

RETAINED EARNINGS, EN D OF YEAR –
INCOME TAX BASIS $ 728,403

SEE ACCOMPANYING ACCOUNTANT’S COMPILATION REPORT

EXPENSES

STATEMENT OF REVENUES, EXPENSES AND
RETAINED EARNINGS-INCOME TAX BASIS

FOR THE YEAR ENDED December 31, 2018

Accreditation
Advertising
Bank Charges
Children’s Activities
Conferences
Contract Services
Depreciation
Director’s Fees
Dues and Subscriptions
Employee Lease Expense
Fire Safety
Gifts
Groceries
Insurance
Lawn Care
Legal and Accounting
Licenses
Loss on Fixed Asset Disposals
Maintenance and Repairs
Meals
Non-Compete Agreement and

Goodwill Amortization
Office Expense
Payroll Processing
Pest Control
Postage
Recruitment and Training
Rent
Salaries-Officers
Salaries-Other
Supplies
Taxes
Taxes-Payroll
Telephone
Utilities
Vehicle Expenses

Total Expenses

$ 3,620
3,188
7,938

32,754
3,925
8,381

129,474
30,000

441
793,053

12,490
3,287

288,390
149,776

41,565
16,890

3,269
121

110,784
3,026

6,667
50,015

6,371
11,658

83
1,324

108,720
308,000

1,279,652
65,072

924
124,097

15,833
94,576
54,565

$3,769,929

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Financial Assessment

Throughout this analysis, we will use Microsoft as a proxy for the SaaS industry, while still recognizing the difference in company size, market share, and life-cycle stage. In addition, we will also reference Black Knight, although not a SaaS industry leader, serves as a good alternative for Appraisal Vision. However, we recognize that Black Knight is a company much further in the life cycle than Appraisal Vision. Black Knight in 2020 posted a profit of $230 million and revenue of $1.197 billion. While Appraisal Vision has posted losses. Both Microsoft and Black Knight will help put the financial ratios in perspective.
AppraisalVision posted an 87.7% growth in revenue year over year in 2020. Meanwhile, their total expenses increased by 54.5%. This shows that even though their losses were bigger in 2020 than in 2019 their revenues are growing at a faster rate than their expenses; if this trend continues, they will be able to post profits. Their total expenses as a percent of their revenue decreased by 17.7%.
To better understand these big picture statistics, we needed to also determine their key drivers. One of the things that contributed to both their increase in revenue and expenses is the great increase in their marketing spending. From 2019 to 2020, marketing expenses increased by 3,288.2%. An investment that most likely led to an increase in clients and subsequently helped grow AppraisalVision’s revenue. Additionally, their depreciation and amortization decreased by 98% in 2020 which played a big role in limiting their expenses. Another notable increase is their payroll and administrative expenses- both increased by more than 100%. This increase means they had more employees which would then allow them to have the ability to scale up their operations to match a growing network. This was especially crucial when the markets saw a surprise increase in demand throughout 2020 as a result of the drop in interest rates.
The company has very good liquidity with a cash ratio of 2.9 and a current ratio of 3.29. The cash ratio means that they have 2.9 times as much cash and cash equivalents as they do total current liabilities. This means that in event that all their current liabilities come to collect now, AppraisalVision would be able to cover them 2.9 times over just with their cash and 3.29 times over if we include all their current assets. Current assets mean assets that can be liquidated within a year. This setup of their financials is in line with tech-industry standards. Most, if not all tech companies have current ratios over 1.0. For example, Microsoft has a cash ratio of 1.89 and a current ratio of 2.52 (Yahoo Finance, 2021). Back Knight also has a cash ratio of 0.12 and a current ratio of 0.99 (Yahoo Finance, 2021).
AppraisalVision’s return on equity is still negative because they still have yet to make a profit. However, their enterprise value (EV) grew by 54.6% year over year in 2020. Enterprise va

INTERNAL ANALYSIS
Ratio analysis is essential in every firm. It helps in the evaluation of a business’s performance. There are four key categories of ratios used for financial analysis. These ratios are categorized into Liquidity, Valuation, Leverage, and Profitability ratios (Karale, 2020).
According to the calculated current ratio, the revenue fluctuated a lot in the past three years for the company. In 2018, revenue was $ 4,471,223 while in 2019, it was $ 4,508,662, and in 2020, $ 3,849,590. Children’s Nest posted a 14.62% decrease in revenue year over year in 2020. Meanwhile, their total expenses decreased by 15.62%. Comment by Ashley Salaiz: To provide some more context, calculaute the % increase here and then compare it to what the industry growth rate is….then we can know if Children’s Nest is above or below the industry growth rate and these numbers will then have even more meaning. Comment by Ashley Salaiz: Need to mention context here – Covid happened.
Liquidity refers to how an asset can be changed into cash. The liquidity ratios show the firm’s or debtor’s ability to pay off its obligations. These ratios include current ratios and cash ratios. Children’s nest must work a lot on the financials for the coming year as it would be helpful for the company in the long run. The result of 2018 current ratio was 1200.31 and gets lower 173.85 in 2019 and 0.55 in 2020. The cash ratio of 2018 was 1024.64 and 149.49 in 2019, and 0.43 in 2020.
The current ratio for the year 2020 was 0.5521 which is the current ratio that displays the company’s aptitude to pay its short-term obligations. A current ratio greater than 0.5 to 1.0 is desirable. The cash ratio for the year 2020 was 0.43 which is the cash ratio confirms the business’s capacity to pay its short-term obligations using cash or cash equivalents. Therefore, any cash ratio between 0.5 to 1 is considered attractive.
The profitability ratios aid in assessing the firm’s ability to generate earnings concerning its income. These ratios may include the net profit margin and the gross profit margin. The profitability ratio of the company is also quite average as it must be improved to produce more benefits for the shareholders by providing them enough benefits and generating enough profit. Children’s Nest’s return on assets for the year 2018 was 0.9989, In 2019, it was 0.9962, while in 2020 decreased to 0.2341. The table below shows the calculated profitability ratios for the company over three consecutive years.
The net profit margin helps link the establishment’s profits to its total revenue. Net profit margin shows how a company changes its sales into proceeds. The Children’s Nest’s net profit margin ratio for 2018, 2019, and 2020 was 0.157, 0.162, and 0.172, respectively. The trend shows an upsurge in the net profit margin from 2018 to 2020. It is an indication that the company is using its sales well to generate proceeds. The gross profit margin ratio helps compare the company’s gross profit t

VRIO human resources (value, rareness, imitability, organization)

Children’s Nest has a friendly director that is clear about her goals. Her focus is completely on the development of all those students that are present in her care. She is very helpful towards her staff and students. (About Us) These capabilities make her valuable because it contributes to the healthy environment of the organization which ultimately leads to the success of the company. Her friendly behavior makes communication easy with staff, which means there is a great collaboration between her and her staff. A focused leader can lead her team in a more effective manner. These capabilities also make her rare, because it isn’t easy to find these qualities in a single person. Comment by Ashley Salaiz: Who is this referring to? Each center has a different director and Tripp manages all of them. Comment by Ashley Salaiz: When mentioning valuable, tie it to increasing revenues and/or decreasing costs.
Moreover, the experienced and innovative staff is the other success factor for Children’s nest. The diversity in staff makes them more effective. Their highly accommodating staff knows how to deal with the diverse behaviors of children. The staff used their experience for the development of the students. To create a nurturing environment, the staff uses their innovative knowledge, because they want to make a safe, loving, stimulating, and warm environment for their students. (About Us)
Furthermore, it is valuable because the staff is the asset of the organization. The success and growth of the organization depend on them. It isn’t rare because almost every organization demands experienced and innovative employees. It isn’t costly to imitate because every person knows about the trend of the market. To capture value, it is organized in the most effective manner, because parents will prefer teachers that are friendly, innovative and have experiences for their children. This factor will help to attract the attention of potential customers. Comment by Ashley Salaiz: When mentioning valuable, tie it to increasing revenues and/or decreasing costs.

VRIO human resources (value, rareness, imitability, organization)

Children’s Nest has a friendly director that is clear about her goals. Her focus is completely on the development of all those students that are present in her care. She is very helpful towards her staff and students. (About Us) These capabilities make her valuable because it contributes to the healthy environment of the organization which ultimately leads to the success of the company. Her friendly behavior makes communication easy with staff, which means there is a great collaboration between her and her staff. A focused leader can lead her team in a more effective manner. These capabilities also make her rare, because it isn’t easy to find these qualities in a single person. Comment by Ashley Salaiz: Who is this referring to? Each center has a different director and Tripp manages all of them. Comment by Ashley Salaiz: When mentioning valuable, tie it to increasing revenues and/or decreasing costs.
Moreover, the experienced and innovative staff is the other success factor for Children’s nest. The diversity in staff makes them more effective. Their highly accommodating staff knows how to deal with the diverse behaviors of children. The staff used their experience for the development of the students. To create a nurturing environment, the staff uses their innovative knowledge, because they want to make a safe, loving, stimulating, and warm environment for their students. (About Us)
Furthermore, it is valuable because the staff is the asset of the organization. The success and growth of the organization depend on them. It isn’t rare because almost every organization demands experienced and innovative employees. It isn’t costly to imitate because every person knows about the trend of the market. To capture value, it is organized in the most effective manner, because parents will prefer teachers that are friendly, innovative and have experiences for their children. This factor will help to attract the attention of potential customers. Comment by Ashley Salaiz: When mentioning valuable, tie it to increasing revenues and/or decreasing costs.




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