Gladys Inc. reported current assets totaling $65,800 and current liabilities totaling $28,750 at December 31, Year 2. The company’s income statement and statement of cash flow for Year 2 appear below:Calculate the following ratios and measures for Gladys Inc. for Year 2:Operating funds ratio, Operating cash flow-to-current liabilities ratio, Cash conversion ratio, Earnings before interest, taxes, depreciation and amortization (EBITDA), Free cash flow, Discretionary cash flow **Statement of Cash Flow for Year 2****Operating Activities:**- **Net Income:** $84,300- **Depreciation Expense:** $16,400- **Accounts Receivable:** ($4,750)- **Inventory:** 150- **Accounts Payable:** ($3,050)- **Income Taxes Payable:** 1,350**Cash Flow from Operations: $94,400**---**Investing Activities:**- **Marketable Securities:** $1,000- **Equipment:** ($49,800)**Cash Flow for Investing: ($48,800)**---**Financing Activities:**- **Common Stock Issued:** 9,500- **Note Payable Borrowings:** 9,750- **Note Payable Payments:** ($8,750)- **Dividends Paid:** ($15,500)**Cash Flow for Financing: ($4,000)**---**Summary:**- **Net Increase in Cash:** 40,800- **Cash, Beginning of Year:** 25,150**Cash, End of Year: $65,950** **Income Statement for Year 2**- **Sales:** $283,200- **Cost of Goods Sold:** $105,000- **Depreciation Expense:** $16,400- **Other Operating Expenses:** $60,500- **Interest Expense:** $6,300- **Income Taxes Expense:** $10,700**Net Income:** $84,300This table presents an income statement for the second year, detailing various expenses and net income derived from sales.

An analysis which is usually done by calculating various quantitative measures so as to check the…

Answered: Gladys Inc. reported current assets…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Gladys Inc. reported current assets totaling $65,800 and current liabilities totaling $28,750 at December 31, Year 2. The company’s income statement and statement of cash flow for Year 2 appear below:

Calculate the following ratios and measures for Gladys Inc. for Year 2:

Operating funds ratio, Operating cash flow-to-current liabilities ratio, Cash conversion ratio, Earnings before interest, taxes, depreciation and amortization (EBITDA), Free cash flow, Discretionary cash flow

**Statement of Cash Flow for Year 2**

**Operating Activities:**

- **Net Income:** $84,300
- **Depreciation Expense:** $16,400
- **Accounts Receivable:** ($4,750)
- **Inventory:** 150
- **Accounts Payable:** ($3,050)
- **Income Taxes Payable:** 1,350

**Cash Flow from Operations: $94,400**

---

**Investing Activities:**

- **Marketable Securities:** $1,000
- **Equipment:** ($49,800)

**Cash Flow for Investing: ($48,800)**

---

**Financing Activities:**

- **Common Stock Issued:** 9,500
- **Note Payable Borrowings:** 9,750
- **Note Payable Payments:** ($8,750)
- **Dividends Paid:** ($15,500)

**Cash Flow for Financing: ($4,000)**

---

**Summary:**

- **Net Increase in Cash:** 40,800
- **Cash, Beginning of Year:** 25,150

**Cash, End of Year: $65,950**

**Income Statement for Year 2**

- **Sales:** $283,200
- **Cost of Goods Sold:** $105,000
- **Depreciation Expense:** $16,400
- **Other Operating Expenses:** $60,500
- **Interest Expense:** $6,300
- **Income Taxes Expense:** $10,700

**Net Income:** $84,300

This table presents an income statement for the second year, detailing various expenses and net income derived from sales.

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