Balance Sheet Assets Cash Accounts receivable Inventory Plant and equipment, net Investment in Buisson, S.A. Land (undeveloped) Total assets Liabilities and Stockholders' Equity Accounts payable
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 data for Joel de Paris, Inc., for last year follow:
Joel de Paris, Inc.
Balance Sheet
Beginning
Ending
Balance
Balance
Assets
138,000
334,000
572,000
806,000
398,000
246,000
$ 2,494,000
Cash
131,000
482,000
489,000
788,000
435,000
254, 000
$ 2,579,000
Accounts receivable
Inventory
Plant and equipment, net
Investment in Buisson, S.A.
Land (undeveloped)
Total assets
Liabilities and Stockholders' Equity
Accounts payable
Long-term debt
Stockholders' equity
389,000
1,025,000
1,080,000
$ 2,494,000
341,000
1,025,000
1,213,000
$ 2,579,000
Total liabilities and stockholders' equity
Joel de Paris, Inc.
Income Statement
$ 5,049,000
4,241,160
807,840
Sales
Operating expenses
Net operating income
Interest and taxes:
$ 125,000
202,000
Interest expense
Тах expense
327,000
Net income
480,840](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F62c5d8d4-bf52-40ff-9a64-70401b9ed938%2F95592b99-a84b-41fc-9ec3-12744f04db37%2Fpecjcpq3_processed.png&w=3840&q=75)
![The company paid dividends of $347,840 last year. The "Investment in Buisson, S.A." on the balance sheet represents an investment
in the stock of another company. The company's minimum required rate of return of 15%.
Required:
1. Compute the company's average operating assets for last year.
2. Compute the company's margin, turnover, and return on investment (ROI) for last year. (Round "Margin", "Turnover" and "ROI" to 2
decimal places.)
3. What was the company's residual income last year?
Average operating assets
Margin
1.
2.
%
Turnover
ROI
%
3.
Residual income](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F62c5d8d4-bf52-40ff-9a64-70401b9ed938%2F95592b99-a84b-41fc-9ec3-12744f04db37%2Fyise68n_processed.png&w=3840&q=75)
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