The 2020 and 2019 financial statements of Ken’s Sportswear follow: Balance Sheet 2020 2019 Assets Cash $9,000 $7,000 Accounts receivable 12,000 9,000 Inventory 18,000 15,000 Property, plant, and equipment 60,000 50,000 Total assets $99,000 $81,000 Liabilities and Shareholders’ Equity Accounts payable $16,500 $12,000 Notes payable 46,000 40,000 Common stock 25,000 25,000 Retained earnings 11,500 4,000 Total liabilities and equity $99,000 $81,000 2020 2019 Income Statement Sales (all on credit) $72,000 Less: Cost of goods sold 30,000 Gross profit $42,000 Operating expenses 12,000 Net income from operations $30,000 Interest expense 5,000 Net income before taxes $25,000 Income tax expense 8,500 Net income $16,500 Dividends $9,000 Per-share market price $36 $30 Outstanding common shares 2,000 2,000 Please, provide the Return on Equity ratio, Return on Assets ratio, Return on Sales ratio, Current ratio, Quick ratio, Receivables Turnover, Inventory Turnover ratio, Debt/Equity ratio, Interest Coverage ratio, Earnings Per Share, Price/Earnings ratio and Dividend Yield ratio.
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 2020 and 2019 financial statements of Ken’s Sportswear follow:
| 2020 | 2019 | |
| Assets | ||
| Cash | $9,000 | $7,000 |
| Accounts receivable | 12,000 | 9,000 |
| Inventory | 18,000 | 15,000 |
| Property, plant, and equipment | 60,000 | 50,000 |
| Total assets | $99,000 | $81,000 |
| Liabilities and Shareholders’ Equity | ||
| Accounts payable | $16,500 | $12,000 |
| Notes payable | 46,000 | 40,000 |
| Common stock | 25,000 | 25,000 |
| 11,500 | 4,000 | |
| Total liabilities and equity | $99,000 | $81,000 |
| 2020 | 2019 | |
| Income Statement | ||
| Sales (all on credit) | $72,000 | |
| Less: Cost of goods sold | 30,000 | |
| Gross profit | $42,000 | |
| Operating expenses | 12,000 | |
| Net income from operations | $30,000 | |
| Interest expense | 5,000 | |
| Net income before taxes | $25,000 | |
| Income tax expense | 8,500 | |
| Net income | $16,500 | |
| Dividends | $9,000 | |
| Per-share market price | $36 | $30 |
| Outstanding common shares | 2,000 | 2,000 |
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