CAN SOMEONE HELP ME WITH THE RATIOS? The comparative statements of Wahlberg Company are presented here. Wahlberg Company Income Statement For the Years Ended December 31 2020 2019 Net sales $1,813,600 $1,750,700 Cost of goods sold 1,007,100 978,000 Gross profit 806,500 772,700 Selling and administrative expenses 519,800 472,000 Income from operations 286,700 300,700 Other expenses and losses Interest expense 17,100 14,200 Income before income taxes 269,600 286,500 Income tax expense 80,015 77,500 Net income $ 189,585 $ 209,000 Wahlberg Company Balance Sheets December 31 Assets 2020 2019 Current assets Cash $60,600 $64,600 Debt investments (short-term) 69,100 50,300 Accounts receivable 117,500 102,800 Inventory 123,600 115,600 Total current assets 370,800 333,300 Plant assets (net) 601,200 523,900 Total assets $972,000 $857,200 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $160,600 $144,800 Income taxes payable 43,100 42,200 Total current liabilities 203,700 187,000 Bonds payable 220,000 200,000 Total liabilities 423,700 387,000 Stockholders’ equity Common stock ($5 par) 277,400 297,100 Retained earnings 270,900 173,100 Total stockholders’ equity 548,300 470,200 Total liabilities and stockholders’ equity $972,000 $857,200 All sales were on account. Net cash provided by operating activities for 2020 was $243,000. Capital expenditures were $139,000, and cash dividends were $91,785.
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.
CAN SOMEONE HELP ME WITH THE RATIOS?
The comparative statements of Wahlberg Company are presented here.
|
Wahlberg Company
Income Statement For the Years Ended December 31 |
||||||
|---|---|---|---|---|---|---|
|
2020
|
2019
|
|||||
|
Net sales
|
$1,813,600 | $1,750,700 | ||||
|
Cost of goods sold
|
1,007,100 | 978,000 | ||||
|
Gross profit
|
806,500 | 772,700 | ||||
|
Selling and administrative expenses
|
519,800 | 472,000 | ||||
|
Income from operations
|
286,700 | 300,700 | ||||
|
Other expenses and losses
|
||||||
|
Interest expense
|
17,100 | 14,200 | ||||
|
Income before income taxes
|
269,600 | 286,500 | ||||
|
Income tax expense
|
80,015 | 77,500 | ||||
|
Net income
|
$ 189,585 | $ 209,000 |
|
Wahlberg Company
Balance Sheets December 31 |
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|---|---|---|---|---|---|---|
|
Assets
|
2020
|
2019
|
||||
|
Current assets
|
||||||
|
Cash
|
$60,600 | $64,600 | ||||
|
Debt investments (short-term)
|
69,100 | 50,300 | ||||
|
|
117,500 | 102,800 | ||||
|
Inventory
|
123,600 | 115,600 | ||||
|
Total current assets
|
370,800 | 333,300 | ||||
|
Plant assets (net)
|
601,200 | 523,900 | ||||
|
Total assets
|
$972,000 | $857,200 | ||||
|
Liabilities and
|
||||||
|
Current liabilities
|
||||||
|
Accounts payable
|
$160,600 | $144,800 | ||||
|
Income taxes payable
|
43,100 | 42,200 | ||||
|
Total current liabilities
|
203,700 | 187,000 | ||||
|
Bonds payable
|
220,000 | 200,000 | ||||
|
Total liabilities
|
423,700 | 387,000 | ||||
|
Stockholders’ equity
|
||||||
|
Common stock ($5 par)
|
277,400 | 297,100 | ||||
|
|
270,900 | 173,100 | ||||
|
Total stockholders’ equity
|
548,300 | 470,200 | ||||
|
Total liabilities and stockholders’ equity
|
$972,000 | $857,200 |
All sales were on account. Net cash provided by operating activities for 2020 was $243,000. Capital expenditures were $139,000, and cash dividends were $91,785.
![### Key Financial Metrics
Understanding the financial health of a business is crucial for stakeholders, and several key metrics can help provide insight into various aspects of a company's performance. Below is an outline of important financial ratios and their corresponding fields where values can be input for analysis:
- **(d) Current Ratio**: This ratio measures a company's ability to pay off its short-term liabilities with its short-term assets. It is calculated as:
\[
\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}
\]
The result is expressed as a ratio (e.g., 2:1).
- **(e) Accounts Receivable Turnover**: This metric indicates how effectively a company is collecting its receivables. It is calculated by:
\[
\text{Accounts Receivable Turnover} = \frac{\text{Net Credit Sales}}{\text{Average Accounts Receivable}}
\]
The result is expressed in times (e.g., 5 times).
- **(f) Average Collection Period**: This metric shows the average number of days it takes for a company to receive payment from its customers. It is calculated as:
\[
\text{Average Collection Period} = \frac{365}{\text{Accounts Receivable Turnover}}
\]
The result is expressed in days (e.g., 30 days).
- **(g) Inventory Turnover**: This ratio measures how many times a company's inventory is sold and replaced over a period. It is calculated as:
\[
\text{Inventory Turnover} = \frac{\text{Cost of Goods Sold}}{\text{Average Inventory}}
\]
The result is expressed in times (e.g., 7 times).
- **(h) Days in Inventory**: This metric indicates the average number of days that inventory is held before it is sold. It is calculated as:
\[
\text{Days in Inventory} = \frac{365}{\text{Inventory Turnover}}
\]
The result is expressed in days (e.g., 50 days).
- **(i) Times Interest Earned**: This ratio measures a company's ability to meet its debt obligations based on its earnings before interest and taxes (EBIT). It is calculated as:
\[
\text{Times Interest Earned} = \frac{\text{](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F9957b034-7dc4-42f0-9ed6-fcce58465f30%2Fbd9c394d-33e7-4f28-8efa-8456eacb75d1%2Fphms4fn_processed.png&w=3840&q=75)
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