ERGPeise 18-2 (Aigo) Financial Ratios for Assessing Liquidity (LO16-2] Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below The company did not issue any new common stock during the year. A total of 500.000 shares of common stock were outstanding interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $0.75 la year and $0.40 this year. The market value of the company's common stock at the end of this year was $29. All of the company's sem are on account. eller Corporation Conparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assetsi Cash Accounts receivable, net Inventory Prepaid expenses Total current assetS Property and equipnenti Land $ 1,210 10,500 13,000 250 $ 1,350 7,600 11,400 ESSICN 20,860 25,460 9,300 45,005 54,305 48,620 $.79,765 Buildings and equipment, net Total property and equipeent Total assets S09,400 Liabilities and Stockholders' Equity Current 1labilities Accounts payable Accrued liabilities Notes payable, short term Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders equity: Connon stock Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 19,100 1,00 270 20,440 $ 18,400 270 19,S00 9,000 29,440 9,000 26,500 s00 4,000 4,500 36,480 40,980 500 4,000 4,500 45,825 5e, 325 $ 79,765 $ 69,480
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.
![Exercise 16-2 (Algo) Financial Ratios for Assessing Liquidity (LO16-2]
Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below.
The company did not issue any new common stock during the year. A total of 500,000 shares of common stock were outstanding. The
interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $075 last
year and $0.40 this year. The market value of the company's common stock at the end of this year was $29. All of the company's sales
are on account.
Meller Corporation
Conparative Balance Sheet
(dollars in thousands)
This Year Last Year
Assets
Current assets:
Cash
Accounts receivable, net
Inventory
Prepaid expenses
Total current assets
Property and equipment:
$1,210
10,se0
13,000
750
$1,350
7,600
11,400
510
25,46e
20,860
Land
9,300
45,005
Bulldings and equipment, net
Total property and equipnent
39,320
54,305 48,620
S 79,765
Total assets
$69,480
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Accrued liabilities
$ 19,100
1,070
$ 18,400
830
Notes payable, short term
Total current liabilities
270
270
20,440
19,500
Long-term liabilities:
Bonds payable
Total liabilities
Stockholders equity:
Common stock
Additional paid-in capital
Total paid-in capital
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' equity
9,000
29,440
9,000
28,500
500
4,000
4,500
45,825
se, 325
$ 79,765
500
4,000
4,500
36,480
48,980
$ 69,480](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F88af8fce-c435-443b-b71c-a96145ca39af%2F9603600d-f34f-4177-8ba6-49ada4befa13%2F8lcyegl_processed.jpeg&w=3840&q=75)
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