Week 3 Homework 2024_chaitanya

INCOME STATEMENT, 2024 BALANCE SHEET, as of Dec 31, 2024 Sales $10,000 ASSETS Cost of goods sold 4,000 Cash $5,000 Gross profit $6,000 Accounts receivable 3,000 S, G & A expenses 3,000 Inventory 17,000 EBIT $3,000 Current assets $25,000 Interest $200 Equipment (gross) 27,000 Before-tax earnings $2,800 Less Accum Depreciation (12,000) Taxes 1,000 Equipment (net) $15,000 Net income $1,800 Total assets $40,000 LIABILITIES AND EQUITY EPS $1.80 Accounts payable $17,000 Current liabilities $17,000 Dividends $600 Long-term debt $3,000 Addition to retained earnings $1,200 Total liabilities $20,000 Common stock (1,000 shares) $7,000 Retained earnings $13,000 Total equity $20,000 Total liabilities & Equity $40,000 Joe's Fly-by-Night Oil BUSN 5200 Homework Assignment for Week 3 2024: For Week 3, please complete the following for Joe’s Fly-By-Night Oil Company, whose latest income statement and balance sheet are shown below: • Prepare a graph of sales and net income for the years 2021 – 2024. For the purposes of this exercise, assume the following historical sales and net income figures for Joe’s Fly-By- Night Oil: Year Sales Net Income 2021 $8,200 $1,500 2022 $8,000 $1,400 2023 $9,000 $1,600 2024 $10,000 $1,800 Comment on the results displayed on the graph.

The graph illustrates the relationship between years (2021-2024) and sales (in $) with the x-axis representing years and the y-axis representing sales. From 2021 to 2024, sales showed a gradual increase, with a notable spike from 2022 to 2023 (11.25% increase) and a less significant increase from 2023 to 2024 (11.11% increase). Sales and net income generally follow a similar trend, although with less volatility. However, there is a slight widening of the gap between sales and net income over time, indicating an increase in spending. • Prepare a pie chart of Joe’s Fly-By-Night Oil’s expense distribution for 2024 and comment on the results displayed.

Assets Amount cash $5,000 Accounts Receivable $3,000 Inventory $17,000 Equipment $15,000 The majority of the total assets, specifically 43%, are comprised of inventory, making it the dominant asset. Conversely, receivables make up the smallest portion, accounting for only 7% of the overall assets. It is worth emphasizing that the company maintains a substantial 12% of its assets in cash, ensuring both liquidity and financial stability. Additionally, a significant allocation of the assets, precisely 38%, is dedicated to equipment, which highlights the company's investment in inventory and its potential for future sales. • Prepare a pie chart of Joe’s Fly-By-Night Oil’s capital structure for Dec 31, 2024 and comment on the results displayed.

Capital Structure Amount Accounts Payable $17,000 Current liabilities $17,000 Long Term Debt $3,000 Total equity $20,000 Equity represents the largest proportion among all other capital structures, accounting for 35% of the total. Additionally, both the amount payable and current liabilities hold an equal share of 30% each. This balanced distribution indicates a stable financial position for the company. Moreover, the long-term debt constitutes only 5% of the overall capital structure, which is a positive aspect as it suggests a lower level of financial risk for the company.