Financial statements for Asklew Industries for 2021 are shown below (in thousands) 2021 Income Statement Net sales $ 8,900 Cost of goods sold (6,225)
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.
Financial statements for Asklew Industries for 2021 are shown below (in thousands)
2021 Income Statement
Net sales $ 8,900
Cost of goods sold (6,225)
Gross profit 2,675
Operating expenses (2,025)
Interest expense (170)
Income tax expense (192)
Net Income $ 288
Comparative Balance Sheets
Dec. 31
2021 2020
Assets
Cash $ 570 $ 470
Accounts receivable 570 370
Inventory 770 570
Property, plant, and equipment (net) 1,700 1,800
$ 3,610 $3,210
Liabilities and Shareholders’ Equity
Current liabilities $ 920 $ 670
Bonds payable 1,250 1,250
Common stock 570 570
$ 3,610 $ 3,210
Required:
Calculate the following ratios for 2021. (Consider 365 days a year. Do not round intermediate calculations and round your final answers to 2 decimal places.)
- Inventory turnover ratio ___________
- Average days in inventory ___________ days
- Receivables turnover ratio ___________
- Average collection period ___________ days
- Asset turnover ratio ___________
- Profit margin on sales ___________ %
- Return on assets ___________ %
- Return on equity ___________ %
- Equity multiplier ____________ times
- Return on equity (using the DuPont framework) ____________ %
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