The Stower Manufacturing Company's balance sheet and income statement for last year are as follows: Balance Sheet (in Millions of Dollars) Liabilities and Equity $887 Accounts payable 2,075 Accrued liabilities (salaries and Assets Cash and marketable securities $724 Accounts receivable benefits) 2,120 Other current liabilities 332 Inventories 1,665 Other current assets 300 Total current liabilities 2,721 $5,382 Long-term debt and other liabilities 3,707 Common stock 687 Retained earnings Total current assets 1,677 296 Plant and equipment (net) Other assets 5,082 Total assets $9,776 Total stockholders' equity $5,378 Total liabilities and equity $9,776 "Assume that averoge inventory over the year $2,120 milion, that is, the same as ending inventory. Income Statement (in Millions of Dollars) $11,990 6,946 2,394 581 Net Sales* Cost of sales Selling, general, and administrative expenses Other expenses Total expenses Earnings before taxes $9,921 2,069 825 Тахes Earnings after taxes (net income) $1,244 *All sa'es are credit sales. Determine the length of Stowe's a. Inventory conversion period b. Receivables conversion period c. Operating cycle d. Payables deferral period e. Cash conversion cycles.
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.
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