Compute the following ratios for 2022. (Round Earnings per share, Current ratio and Asset turnover to 2 deci and all other answers to 1 decimal place, e.g. 6.8 or 6.8%. Use 365 days for calculation.) (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (1) here to search Earnings per share Return on common stockholders' equity Return on assets Current ratio Accounts receivable turnover Average collection period Inventory turnover Days in inventory Times interest earned Asset turnover Debt to assets ratio Free cash flow с é $ LA $ LA % % :1 times days times days times times %
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 Crane Company are presented here.
|
Crane Company
Income Statement For the Years Ended December 31 |
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|---|---|---|---|---|---|---|
|
2022
|
2021
|
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|
Net sales
|
$1,817,500 | $1,753,100 | ||||
|
Cost of goods sold
|
1,008,600 | 978,000 | ||||
|
Gross profit
|
808,900 | 775,100 | ||||
|
Selling and administrative expenses
|
519,200 | 480,800 | ||||
|
Income from operations
|
289,700 | 294,300 | ||||
|
Other expenses and losses
|
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|
Interest expense
|
18,900 | 14,100 | ||||
|
Income before income taxes
|
270,800 | 280,200 | ||||
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Income tax expense
|
81,512 | 78,000 | ||||
|
Net income
|
$ 189,288 | $ 202,200 |
|
Crane Company
Balance Sheets December 31 |
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|---|---|---|---|---|---|---|
|
Assets
|
2022
|
2021
|
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|
Current assets
|
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|
Cash
|
$60,300 | $64,500 | ||||
|
Debt investments (short-term)
|
68,300 | 50,500 | ||||
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Accounts receivable (net)
|
116,100 | 101,000 | ||||
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Inventory
|
122,700 | 115,200 | ||||
|
Total current assets
|
367,400 | 331,200 | ||||
|
Plant assets (net)
|
603,300 | 521,600 | ||||
|
Total assets
|
$970,700 | $852,800 | ||||
|
Liabilities and
|
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|
Current liabilities
|
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|
Accounts payable
|
$161,000 | $145,900 | ||||
|
Income taxes payable
|
43,100 | 41,900 | ||||
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Total current liabilities
|
204,100 | 187,800 | ||||
|
Bonds payable
|
220,000 | 200,000 | ||||
|
Total liabilities
|
424,100 | 387,800 | ||||
|
Stockholders’ equity
|
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|
Common stock ($5 par)
|
276,200 | 297,400 | ||||
|
|
270,400 | 167,600 | ||||
|
Total stockholders’ equity
|
546,600 | 465,000 | ||||
|
Total liabilities and stockholders’ equity
|
$970,700 | $852,800 |
All sales were on credit. Net cash provided by operating activities for 2022 was $240,000. Capital expenditures were $146,000, and cash dividends paid were $86,488.
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