Simon Company's year-end balance sheets follow. At December 31 Current Yr 1 Yr Ago 2 Yrs Ago Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net $ 30,200 87,300 111,500 10,650 281,000 $ 36,000 $ 38,200 62,000 82,000 9,450 255,500 $444,950 $ 381,700 50,500 55,000 5,000 233,000 Total assets $520,650 Liabilities and EquityY Accounts payable Long-term notes payable secured by mortgages on plant assets Common stock, $10 par value Retained earnings $129,600 $ 76,000 $ 51,200 95,500 161,500 134,050 82,000 161,500 87,000 $444,950 $ 381,700 99,000 161,500 108,450 Total liabilities and equity $520,650 The company's income statements for the Current Year and 1 Year Ago, follow. For Year Ended December 31 Current Yr 1 Yr Ago Sales $ 715,000 $ 640,000 Cost of goods sold Other operating expenses Interest expense $ 421,850 221,650 12,400 9,450 $ 403,200 153,600 12,800 8,975 Income tax expense Total costs and expenses 665,350 $ 49,650 578,575 $ 61,425 Net income Earnings per share 3.07 3.80 For both the Current Year and 1 Year Ago, compute the following ratios:
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.
(The following information applies to the questions displayed below. Simon Company's year-end
(1 - a) Profit margin . (-b) Did profit margin improve or worsen in the Current Year versus 1 Year Ago?
The profit margin ratio is one of the profitability ratios that is used to measure what percentage of the company’s sales are left after all expenses are paid off.
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