Discuss changes from 2021 in liquidity, solvency, and profitability

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Problem 2-05A b (Essay)

The following are financial statements of Ohara Company.

Ohara Company
Income Statement
For the Year Ended December 31, 2022
Net sales
  $2,218,500
Cost of goods sold
  1,012,400
Selling and administrative expenses
  906,000
Interest expense
  78,000
Income tax expense
  69,000
Net income
  $ 153,100

Ohara Company
Balance Sheet
December 31, 2022
Assets
   
Current assets
   
  Cash
  $ 60,100
  Debt investments
  84,000
  Accounts receivable (net)
  169,800
  Inventory
  145,000
   Total current assets
  458,900
Plant assets (net)
  575,300
Total assets
  $ 1,034,200
Liabilities and Stockholders’ Equity
   
Current liabilities
   
  Accounts payable
  $ 160,000
  Income taxes payable
  35,500
   Total current liabilities
  195,500
Bonds payable
  200,000
   Total liabilities
  395,500
Stockholders’ equity
   
  Common stock
  350,000
  Retained earnings
  288,700
   Total stockholders’ equity
  638,700
Total liabilities and stockholders’ equity
  $1,034,200


Additional information: The net cash provided by operating activities for 2022 was $190,800. The cash used for capital expenditures was $92,000. The cash used for dividends was $31,000. The weighted-average common shares outstanding during the year was 50,000.

(i)   Working capital. (2021: $160,500; 2022: $263,400)
(ii)   Current ratio. (2021: 1.65:1; 2022: 2.35:1)
(iii)   Free cash flow. (2021: $48,700; 2022: $67,800)
(iv)   Debt to assets ratio. (2021: 31%; 2022: 38.2%)
(v)   Earnings per share. (2021: $3.15; 2022: $3.06)

(b)

Discuss changes from 2021 in liquidity, solvency, and profitability.

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