Working capital. Current ratio. (Round your answers to 2 decimal places.) Quick ratio. (Round your answers to 2 decimal places.) Receivables turnover (beginning receivables at January 1, 2018, were $37,000). (Round your answers to 2 decimal places.) Average days to collect accounts receivable.
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.
Financial statements for Benson Company follow.
| BENSON COMPANY | |||||||
| Balance Sheets As of December 31 |
|||||||
| 2019 | 2018 | ||||||
| Assets | |||||||
| Current assets | |||||||
| Cash | $ | 17,500 | $ | 13,500 | |||
| Marketable securities | 20,300 | 6,300 | |||||
| 44,000 | 36,000 | ||||||
| Inventories | 129,000 | 137,000 | |||||
| Prepaid items | 28,000 | 13,000 | |||||
| Total current assets | 238,800 | 205,800 | |||||
| Investments | 27,000 | 20,000 | |||||
| Plant (net) | 270,000 | 255,000 | |||||
| Land | 29,000 | 24,000 | |||||
| Total assets | $ | 564,800 | $ | 504,800 | |||
| Liabilities and |
|||||||
| Liabilities | |||||||
| Current liabilities | |||||||
| Notes payable | $ | 17,200 | $ | 8,500 | |||
| Accounts payable | 88,800 | 75,000 | |||||
| Salaries payable | 24,000 | 18,000 | |||||
| Total current liabilities | 130,000 | 101,500 | |||||
| Noncurrent liabilities | |||||||
| Bonds payable | 130,000 | 130,000 | |||||
| Other | 27,000 | 22,000 | |||||
| Total noncurrent liabilities | 157,000 | 152,000 | |||||
| Total liabilities | 287,000 | 253,500 | |||||
| Stockholders’ equity | |||||||
| 80,000 | 80,000 | ||||||
| Common stock (no par; 50,000 shares authorized; 10,000 shares issued) | 80,000 | 80,000 | |||||
| 117,800 | 91,300 | ||||||
| Total stockholders’ equity | 277,800 | 251,300 | |||||
| Total liabilities and stockholders’ equity | $ | 564,800 | $ | 504,800 | |||
| BENSON COMPANY | |||||||
| Statements of Income and Retained Earnings For the Years Ended December 31 |
|||||||
| 2019 | 2018 | ||||||
| Revenues | |||||||
| Sales (net) | $ | 260,000 | $ | 240,000 | |||
| Other revenues | 8,600 | 5,600 | |||||
| Total revenues | 268,600 | 245,600 | |||||
| Expenses | |||||||
| Cost of goods sold | 130,000 | 112,000 | |||||
| Selling, general, and administrative | 58,000 | 53,000 | |||||
| Interest expense | 8,900 | 8,100 | |||||
| Income tax expense | 38,000 | 37,000 | |||||
| Total expenses | 234,900 | 210,100 | |||||
| Net earnings (net income) | 33,700 | 35,500 | |||||
| Retained earnings, January 1 | 91,300 | 63,000 | |||||
| Less: Preferred stock dividends | 4,000 | 4,000 | |||||
| Common stock dividends | 3,200 | 3,200 | |||||
| Retained earnings, December 31 | $ | 117,800 | $ | 91,300 | |||
Required
Calculate the following ratios for 2019 and 2018. Since 2017 numbers are not presented, do not use averages when calculating the ratios for 2018. Instead, use the number presented on the 2018
Working capital .Current ratio . (Round your answers to 2 decimal places.)- Quick ratio. (Round your answers to 2 decimal places.)
- Receivables turnover (beginning receivables at January 1, 2018, were $37,000). (Round your answers to 2 decimal places.)
- Average days to collect accounts receivable. (Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.)
- Inventory turnover (beginning inventory at January 1, 2018, was $143,000). (Round your answers to 2 decimal places.)
- Number of days to sell inventory. (Round your intermediate calculations to 2 decimal places and your final answers to the nearest whole number.)
- Debt to assets ratio. (Round your answers to the nearest whole percent.)
- Debt to equity ratio. (Round your answers to 2 decimal places.)
- Number of times interest was earned. (Round your answers to 2 decimal places.)
- Plant assets to long-term debt. (Round your answers to 2 decimal places.)
- Net margin. (Round your answers to 2 decimal places.)
- Turnover of assets. (Round your answers to 2 decimal places.)
Return on investment . (Round your answers to 2 decimal places.)- Return on equity. (Round your answers to 2 decimal places.)
- Earnings per share. (Round your answers to 2 decimal places.)
- Book value per share of common stock. (Round your answers to 2 decimal places.)
- Price-earnings ratio (market price per share: 2018, $11.90; 2019, $12.80). (Round your intermediate calculations and final answer to 2 decimal places.)
- Dividend yield on common stock. (Round your answers to 2 decimal places.)
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