Group Problem Set 1: This problem Set is based on materials covered in modules 1 and 2. It is designed for you to demonstrate your understanding of basic financial statements, financial statement analysis, break-even concepts, financial and operating leverages. Before you start this assignment, please review Modules 1 and 2 materials thoroughly.Finance date of Adams Stores, Inc. for the year ending 2016 and 2017.Items 2016 2017Sales $3,432,000 $5,834,400Cash 9,000 7,282Other Expenses 340,000 720,000Retained Earnings 203,768 97,632Long-term debt 323,432 1,000,000Cost of goods sold 2,864,000 4,980,000Depreciation 18,900 116,960Short-term investments 48,600 20,000Fixed Assets 491,000 1,202,950Interest Expenses 62,500 176,000Shares outstanding (par value = $46.00) 100,000 100,000Market Price of stock 8.50 6Accounts Receivable 351,200 632,160Accounts payable 145,600 324,000Inventory 715,200 1,287,360Notes Payable 200,000 720,000Accumulated Depreciation 146,200 263,160Accruals 136,000 284,960Tax Rate 40% 40%Instructions:Complete the following activities using the financial information above:Part 1: Financial StatementsA. Prepare the income statement for 2016 and 2017. Include statement of retained earnings for 2017. The company paid $11,000 dividend in 2017.B. Prepare the balance sheet for 2016 and 2017C. Prepare Common-Size financial statements of income statement and balance sheet.D. Prepare Statement of Cash Flows.Part 2: Financial Statement AnalysisA. Based on your financial statements (from Part 1), calculate the following ratios for the two years. Show all your calculations in good form. Show your formulas. If you use excel, each calculation need to show the excel formulaCurrent ratioQuick ratioInventory turnover (times)Average collection period (days)Total asset turnover (times)Debt ratioTimes interest earnedGross profit marginNet profit marginReturn on total assetsReturn on equityP/E ratioReturn on equity using DuPont AnalysisB. Comments on the ratios by comparing 2016 to 2017 ratios.C. Assume Adams Stores, Inc. is a retail company similar to WalMart, Myers, or Target. Compare 2017 ratios to the industry average. Please note that Adams Stores, Inc. is not a real company. To find comparable industry ratios, you need to search for industry ratios for retail. See information on Moodle for instructions on how to find industry ratios. Based on the industry average, how is Adams Stores, Inc. doing financially?Part 3: Break-even, Financial and Operating LeveragesJohnson Products, Inc.Income StatementFor the Year Ended December 31, 2018Sales (40,000 bags at $50 each) $2,000,000 Less: Variable costs (40,000 bags at $25) 1,000,000 Fixed costs 600,000Earnings before interest and taxes 400,000Interest expense 120,000Earnings before taxes 280,000Income tax expense (20%) 56,000Net income $ 224,000Based on the information above, calculate (show all calculations and responses in good form):a. Break-even in units (in dollars and units). Explain what your numbers mean. As a manager, how would you use the numbers in financial planning?b. What is the degree of financial leverage? Explain what your number mean. As a manager, how would you use the numbers in financial planning?c. What is the degree of operating leverage? Explain what your number mean. As a manager, how would you use the numbers in financial planning?