Al-Itihad Corporation Balance Sheet December 31, 2019 Assets Liability & Equity Current Assets Current Liability Cash $5,000 Accounts payable 22,000 Short term securities 10,000 Accrual Account 8,000 Account Receivables 30,000 Short term debt 6,000 Inventory 32,000 Total Current Liability 36,000 Long-term debt 40,000 Total Current Assets 77,000 Total Liability 76,000 Long term Assets Equity Net Property & equipment 70,000 Common Stocks 64,000 Retained earnings 17,000 Total Equity 81,000 Total Liability and Equity 157,000 Other assts 10000 Total Assets 157,000 Sur Corporation Income Statement December 31, 2019 Other Financial information of Sur corporation December 31, 2019 Net sales (revenue) $150,000 · Average Number of Common shares outstanding 16,000 Shares · Market price of Common share $3.5 Cost of goods sold 80,000 Gross profit 70,000 Operating expenses 30,000 EBIT- (Operating profit) 40,000 Interest expense 10,000 EBT- ( Earnings before taxes) 30,000 Income tax 10,000 Net Income (net profit) 20,000 Question one 18 Mark You have to find the following ratios for Al-Itihad Corporation, each one carry 1.5 mark: Long term debt ratio Debt equity ratio Debt ratio Time interest earned Current ratio Cash ratio Average collection period Days sales in inventory Days payable outstanding Cash conversion cycle Return on assets Return on Equity
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.
Al-Itihad Corporation December 31, 2019 |
|||
Assets |
|
Liability & Equity |
|
Current Assets |
|
Current Liability |
|
Cash |
$5,000 |
Accounts payable |
22,000 |
Short term securities |
10,000 |
Accrual Account |
8,000 |
Account Receivables |
30,000 |
Short term debt |
6,000 |
Inventory |
32,000 |
Total Current Liability |
36,000 |
Long-term debt |
40,000 |
||
Total Current Assets |
77,000 |
Total Liability |
76,000 |
Long term Assets |
|
Equity |
|
Net Property & equipment |
70,000 |
Common Stocks |
64,000 |
|
17,000 |
||
Total Equity |
81,000 |
||
Total Liability and Equity |
157,000 |
||
Other assts |
10000 |
|
|
Total Assets |
157,000 |
Sur Corporation Income Statement December 31, 2019 |
|
Other Financial information of Sur corporation December 31, 2019 |
Net sales (revenue) |
$150,000 |
· Average Number of Common shares outstanding 16,000 Shares · Market price of Common share $3.5
|
Cost of goods sold |
80,000 |
|
Gross profit |
70,000 |
|
Operating expenses |
30,000 |
|
EBIT- (Operating profit) |
40,000 |
|
Interest expense |
10,000 |
|
EBT- ( Earnings before taxes) |
30,000 |
|
Income tax |
10,000 |
|
Net Income (net profit) |
20,000 |
Question one 18 Mark
You have to find the following ratios for Al-Itihad Corporation, each one carry 1.5 mark:
- Long term debt ratio
- Debt equity ratio
- Debt ratio
- Time interest earned
- Current ratio
- Cash ratio
- Average collection period
- Days sales in inventory
- Days payable outstanding
- Cash conversion cycle
Return on assets Return on Equity
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