Financial statements for Steele Inc. follow. Steele Inc. Consolidated Statements of Income (in thousands except per share amounts) 2023 2022 2021 Net sales $7,245,088 $6,944,296 $6,149,218 Cost of goods sold (5,286,253) (4,953,556) (4,355,675) Gross margin $1,958,835 $1,990,740 $1,793,543 General and administrative expenses (1,259,896) (1,202,042) (1,080,843) Special and nonrecurring items 2,617 0 0 Operating income $701,556 $788,698 $712,700 Interest expense (63,685) (62,398) (63,927) Other income 7,308 10,080 11,529 Gain on sale of investments 0 9,117 0 Income before income taxes $645,179 $745,497 $660,302 Provision for income taxes 254,000 290,000 257,000 Net income $391,179 $455,497 $403,302 Steele Inc. Consolidated Balance Sheets (in thousands) ASSETS Dec. 31, 2023 Dec. 31, 2022 Current assets: Cash and equivalents $320,558 $41,235 Accounts receivable 1,056,911 837,377 Inventories 733,700 803,707 Other 109,456 101,811 Total current assets $2,220,625 $1,784,130 Property and equipment, net 1,666,588 1,813,948 Other assets 270,792 248,372 Total assets $4,158,005 $3,846,450 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $250,363 $309,092 Accrued expenses 347,892 274,220 Other current liabilities 15,700 0 Income taxes 93,489 137,466 Total current liabilities $707,444 $720,778 Long-term debt 650,000 541,639 Deferred income taxes 275,101 274,844 Other long-term liabilities 61,267 41,572 Total liabilities $1,693,812 $1,578,833 Stockholders' equity: Preferred stock $100,000 $100,000 Common stock 89,727 89,727 Additional paid-in capital—common stock 128,906 127,776 Retained earnings 2,397,112 2,136,794 $2,715,745 $2,454,297 Less: Treasury stock, at cost (251,552) (186,680) Total stockholders' equity $2,464,193 $2,267,617 Total liabilities and stockholders' equity $4,158,005 $3,846,450 Use the information provided above and below to respond to the following requirements. Statement Item January 1, 2022 (in thousands) Total assets $3,485,233 Total stockholders’ equity 2,083,122 Required: Compute the five profitability ratios for 2022 and 2023. Round intermediate calculations and final answers to two decimal places. 2023 2022 Gross profit percentage fill in the blank 1% fill in the blank 2% Operating margin percentage fill in the blank 3% fill in the blank 4% Net profit margin percentage fill in the blank 5% fill in the blank 6%
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.
Profitability Ratios
Financial statements for Steele Inc. follow.
| Steele Inc. | |||||
| Consolidated Statements of Income | |||||
| (in thousands except per share amounts) | |||||
| 2023 | 2022 | 2021 | |||
| Net sales | $7,245,088 | $6,944,296 | $6,149,218 | ||
| Cost of goods sold | (5,286,253) | (4,953,556) | (4,355,675) | ||
| Gross margin | $1,958,835 | $1,990,740 | $1,793,543 | ||
| General and administrative expenses | (1,259,896) | (1,202,042) | (1,080,843) | ||
| Special and nonrecurring items | 2,617 | 0 | 0 | ||
| Operating income | $701,556 | $788,698 | $712,700 | ||
| Interest expense | (63,685) | (62,398) | (63,927) | ||
| Other income | 7,308 | 10,080 | 11,529 | ||
| Gain on sale of investments | 0 | 9,117 | 0 | ||
| Income before income taxes | $645,179 | $745,497 | $660,302 | ||
| Provision for income taxes | 254,000 | 290,000 | 257,000 | ||
| Net income | $391,179 | $455,497 | $403,302 |
| Steele Inc. | ||||||
| Consolidated |
||||||
| (in thousands) | ||||||
| ASSETS | Dec. 31, 2023 | Dec. 31, 2022 | ||||
| Current assets: | ||||||
| Cash and equivalents | $320,558 | $41,235 | ||||
| 1,056,911 | 837,377 | |||||
| Inventories | 733,700 | 803,707 | ||||
| Other | 109,456 | 101,811 | ||||
| Total current assets | $2,220,625 | $1,784,130 | ||||
| Property and equipment, net | 1,666,588 | 1,813,948 | ||||
| Other assets | 270,792 | 248,372 | ||||
| Total assets | $4,158,005 | $3,846,450 | ||||
| LIABILITIES AND |
||||||
| Current liabilities: | ||||||
| Accounts payable | $250,363 | $309,092 | ||||
| Accrued expenses | 347,892 | 274,220 | ||||
| Other current liabilities | 15,700 | 0 | ||||
| Income taxes | 93,489 | 137,466 | ||||
| Total current liabilities | $707,444 | $720,778 | ||||
| Long-term debt | 650,000 | 541,639 | ||||
| 275,101 | 274,844 | |||||
| Other long-term liabilities | 61,267 | 41,572 | ||||
| Total liabilities | $1,693,812 | $1,578,833 | ||||
| Stockholders' equity: | ||||||
| $100,000 | $100,000 | |||||
| Common stock | 89,727 | 89,727 | ||||
| Additional paid-in capital—common stock | 128,906 | 127,776 | ||||
| 2,397,112 | 2,136,794 | |||||
| $2,715,745 | $2,454,297 | |||||
| Less: |
(251,552) | (186,680) | ||||
| Total stockholders' equity | $2,464,193 | $2,267,617 | ||||
| Total liabilities and stockholders' equity | $4,158,005 | $3,846,450 |
Use the information provided above and below to respond to the following requirements.
| Statement Item | January 1, 2022 (in thousands) | |
| Total assets | $3,485,233 | |
| Total stockholders’ equity | 2,083,122 |
Required:
Compute the five profitability ratios for 2022 and 2023. Round intermediate calculations and final answers to two decimal places.
| 2023 | 2022 | |
| Gross profit percentage | fill in the blank 1% | fill in the blank 2% |
| Operating margin percentage | fill in the blank 3% | fill in the blank 4% |
| Net profit margin percentage | fill in the blank 5% | fill in the blank 6% |
| Return on assets | fill in the blank 7% | fill in the blank 8% |
| Return on equity | fill in the blank 9% | fill in the blank 10% |
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