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Energy Devices, Inc. (B)
Author(s):
Young, David W.
Functional Area(s):
   Finance/Financial Management
   Financial Accounting
Setting(s):
   For Profit
Difficulty Level: Beginner
Pages: 2
Teaching Note: Available. 
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First Page and the Assignment Questions:

Energy Devices, Inc. (EDI), purchases energy-saving devices in bulk, repackages them, and sells them to hardware stores in various locales. Its products consist of shower nozzles that restrict the flow of water, thermostats with timers, and storm windows.

Exhibit 1 contains the company’s balance sheets as of December 31 of the two most recent years, and its operating statement for the most recent year.

Assignment

  1. Calculate all relevant ratios for EDI.*
  2. What do the ratios tell you about EDI that you didn't already know?
  3. What additional information would you like to have about EDI to better analyze their financial statements?
* Try to set up a spreadsheet to calculate the ratios. Set it up to be as “formula driven” as possible, i.e., in such a way that you need to enter as few items as possible from the financial statements. Then use the spreadsheet for other cases when you need to calculate ratios. If you set the spreadsheet up correctly, you should be able to calculate ratios for the next organization you analyze by copying the EDI file and entering the numbers from the new set of financial statements. All relevant ratios then should be calculated automatically by the spreadsheet formulas.