You are asked to provided a comparative financial statement analysis of Star Corporation and Moon Stores Inc. for the the current year. Your junior accountant has collected the following data for you. Star Corp. Moon Stores Income Statement Net Sales Cost of Goods Sold Sell and Administrative expenses 61471 374,526 41,895 286,515 16,200 70,847 647 Interest Expense Other income (expense) Income tax expense 1,798 1,896 4,273 1,776 6,908 Net Income 2,849 12,731 Balance Sheet Current Assets 18,906 47,585 Long-term Assets 25,654 115,929 Total Assets $ 44,560 163,514 Current Liabilities 11,782 58,454 Long-term debt Total stockholders equity Total liabilities and equity 17,471 40,452 15,307 64,608 $ 44,560 163,514 Beginning of the year balances Total assets 37,349 151,587 Total equity 15,633 61,573 Current liabilities 11,117 52,148 Total liabilities 21,716 90,014 Other data Average net accounts receivable Average inventory Net cash provided by operating activities 7,124 $ 3,247 6,517 34,433 4,125 20,354 Your task: a. For each of the companies, calculate and explain the following ratios: Current ratio, Accounts receivable turnover, Average collection period, Inventory turnover, Days in inventory, Profit margin, Asset turnover, Return on assets, Return on equity, Debt to assets and Times interest earned. b. Between these two companies, which one is in a better position in terms of liquidy, profitability and solvency? Explain your answer. SSSl SSS S SSS SSS SSS S
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.
Step by step
Solved in 3 steps
