1. The template includes all the data necessary to complete the two financial statements, and ratio analyses. But, the financial statement data is in random order, so you must determine where in each financial statement the items should be placed.
2. Complete the income statement first, since net income will affect stockholders' equity on the balance sheet. Note that you need to calculate cost of goods sold for the income statement.
3. Next, complete the balance sheet, taking into account the effect net income has on stockholders' equity. Before you finish, make sure the balance sheet meets the accounting equation.
4. Now you can complete your ratio analyses. Since certain ratios require prior year data, that data has also been included in the template. After calculating the ratios, add a brief analysis about what each ratio means for The Coffee Hut's financial position and results of operations.
5. The final step is to complete the contribution margin question. If cost of goods sold is the only variable cost, and the contribution margin per drink is $3.40, how many coffee drinks did The Coffee Hut sell? What was the average selling price?