The comparative statements of Wildhorse Co. are presented here: WILDHORSE CO. Income Statements For the Years Ended December 31 2022 2021 Net sales $1,892,340 $1,752,300 Cost of goods sold 1,060,340 1,007,800 Gross profit 832,000 744,500 Selling and administrative expenses 501,800 480,800 Income from operations 330,200 263,700 Other expenses and losses Interest expense 23,700 21,700 Income before income taxes 306,500 242,000 Income tax expense 93,700 74,700 Net income $212,800 $167,300 WILDHORSE CO. Balance Sheets December 31 Assets 2022 2021 Current assets Cash $60,100 $64,200 Debt investments (short-term) 74,000 50,000 Accounts receivable (net) 119,600 104,600 Inventory 127,700 117,200 Total current assets 381,400 336,000 Plant assets (net) 663,000 534,300 Total assets $1,044,400 $870,300 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $161,800 $147,200 Income taxes payable 45,200 43,700 Total current liabilities 207,000 190,900 Bonds payable 234,000 214,000 Total liabilities 441,000 404,900 Stockholders’ equity Common stock ($5 par) 290,000 300,000 Retained earnings 313,400 165,400 Total stockholders’ equity 603,400 465,400 Total liabilities and stockholders’ equity $1,044,400 $870,300 All sales were on credit. Net cash provided by operating activities for 2022 was $231,000. Capital expenditures were $137,000, and cash dividends paid were $64,800. Compute the following ratios for 2022. (Round earnings per share, current ratio and asset turnover to 2 decimal places, e.g. 1.83. Round return on common stockholders’ equity, return on assets, accounts receivable turnover, average collection period, inventory turnover, days in inventory, times interest earned and debt to assets ratio to 1 decimal place, e.g. 1.8 or 1.8%. Use 365 days for calculation.) (a) Earnings per share $enter Earnings per share in dollars rounded to 2 decimal places (b) Return on common stockholders’ equity enter Return on common stockholders’ equity in percentages rounded to 1 decimal place % (c) Return on assets enter Return on assets in percentages rounded to 1 decimal place %
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
The comparative statements of Wildhorse Co. are presented here:
|
WILDHORSE CO.
Income Statements For the Years Ended December 31 |
||||
|---|---|---|---|---|
|
2022
|
2021
|
|||
| Net sales |
$1,892,340
|
$1,752,300
|
||
| Cost of goods sold |
1,060,340
|
1,007,800
|
||
| Gross profit |
832,000
|
744,500
|
||
| Selling and administrative expenses |
501,800
|
480,800
|
||
| Income from operations |
330,200
|
263,700
|
||
| Other expenses and losses | ||||
| Interest expense |
23,700
|
21,700
|
||
| Income before income taxes |
306,500
|
242,000
|
||
| Income tax expense |
93,700
|
74,700
|
||
| Net income |
$212,800
|
$167,300
|
|
WILDHORSE CO.
Balance Sheets December 31 |
||||
|---|---|---|---|---|
|
Assets
|
2022
|
2021
|
||
| Current assets | ||||
| Cash |
$60,100
|
$64,200
|
||
| Debt investments (short-term) |
74,000
|
50,000
|
||
| Accounts receivable (net) |
119,600
|
104,600
|
||
| Inventory |
127,700
|
117,200
|
||
|
Total current assets
|
381,400
|
336,000
|
||
| Plant assets (net) |
663,000
|
534,300
|
||
| Total assets |
$1,044,400
|
$870,300
|
||
|
Liabilities and
|
||||
| Current liabilities | ||||
| Accounts payable |
$161,800
|
$147,200
|
||
| Income taxes payable |
45,200
|
43,700
|
||
|
Total current liabilities
|
207,000
|
190,900
|
||
| Bonds payable |
234,000
|
214,000
|
||
| Total liabilities |
441,000
|
404,900
|
||
| Stockholders’ equity | ||||
| Common stock ($5 par) |
290,000
|
300,000
|
||
| |
313,400
|
165,400
|
||
|
Total stockholders’ equity
|
603,400
|
465,400
|
||
| Total liabilities and stockholders’ equity |
$1,044,400
|
$870,300
|
All sales were on credit. Net cash provided by operating activities for 2022 was $231,000. Capital expenditures were $137,000, and cash dividends paid were $64,800.
Compute the following ratios for 2022. (Round earnings per share,
| (a) | Earnings per share |
$enter Earnings per share in dollars rounded to 2 decimal places
|
|||
|---|---|---|---|---|---|
| (b) | Return on common stockholders’ equity |
enter Return on common stockholders’ equity in percentages rounded to 1 decimal place
|
% | ||
| (c) | Return on assets |
enter Return on assets in percentages rounded to 1 decimal place
|
% | ||
| (d) | Current ratio |
enter a number for current ratio rounded to 2 decimal places
|
:1 | ||
| (e) | Accounts receivable turnover |
enter a number for accounts receivable turnover in times rounded to 1 decimal place
|
times | ||
| (f) | Average collection period |
enter a number for Average collection period in days rounded to 0 decimal places
|
days | ||
| (g) | Inventory turnover |
enter a number for inventory turnover in times rounded to 1 decimal place
|
times | ||
| (h) | Days in inventory |
enter a number of days in inventory rounded to 0 decimal places
|
days | ||
| (i) | Times interest earned |
enter a number for times interest earned rounded to 1 decimal place
|
times | ||
| (j) | Asset turnover |
enter a number for asset turnover in times rounded to 2 decimal places
|
times | ||
| (k) | Debt to assets ratio |
enter Debt to assets ratio in percentages rounded to 1 decimal place
|
% | ||
| (l) |
$enter free cash flow in dollars rounded to 0 decimal place
|
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