Chapter 6, Problem 1BTN

1.

To determine

To identify:

Total amount of cash and cash equivalents and its percentage in reference of total current assets, total current liabilities, total shareholder’s equity and total assets for 2012 and 2013.

Explanation of Solution

Balance of cash and cash equivalents as on September 28, 2013 and September 29, 2015 are as follows:

Particulars	Balance as on September 28, 2013 ($)	% of cash and cash equivalents (%)	Balance as on September 29, 2012 ($)	% of cash and cash equivalents (%)
Cash and its equivalents	14,259		10,746
Current Assets	73,286	$\left(\frac{14,259}{73,286}\times 100\right)$ 19.5	57,653	$\left(\frac{10,746}{57,653}\times 100\right)$ 18.6
Current Liabilities	43,658	$\left(\frac{14,259}{43,658}\times 100\right)$ 32.7	38,542	$\left(\frac{10,746}{38,542}\times 100\right)$ 27.9
Shareholder’s Equity	123,549	$\left(\frac{14,259}{123,549}\times 100\right)$ 11.5	118,210	$\left(\frac{10,746}{118,210}\times 100\right)$ 9.1
Net Assets	207,000	$\left(\frac{14,259}{207,000}\times 100\right)$ 6.9	176,064	$\left(\frac{10,746}{176,064}\times 100\right)$ 6.1

Table (1)

Review of trend:

From above data, it is observed that cash and cash equivalents have increased in 2013 as compared to 2012.

Hence, it is ascertained that liquidity position of A Company has increased slightly as compared to last year.

2.

To determine

Cash and cash equivalents percentage change in the beginning and ending of the year through the information contained in cash flow statement of September 28, 2013 and September 29, 2012.

Explanation of Solution

Formula to calculate the percentage change in cash and cash equivalents is:

$\text{Percentage}\text{change}=\left(\frac{\left(\begin{array}{l}\text{Cash and}\text{cash}\text{equivalents}\text{at}\text{the}\text{end}\\ -\text{Cash}\text{equivalents}\text{in}\text{the}\text{beginning}\end{array}\right)}{\text{Cash}\text{and}\text{cash}\text{equivalents}\text{at}\text{the}\text{end}}\right)$

2013

Given,

Cash and cash equivalents in the beginning of 2013 is $10,746 million.

Cash and cash equivalents at the end of the year is $14,259 million.

Substitute $10,746 million for cash and cash equivalents in the beginning of the 2015 and $14,259 million at the end of the year,

$\begin{array}{c}\text{Percentage}\text{change}=\frac{\left(\$14,259\text{ million}-\$10,746\text{ million}\right)}{\$14,259\text{ million}}\times 100\\ =\frac{\$3,513\text{ million}}{\$14,259\text{ million}}\times 100\\ =24.6\%\end{array}$

Hence, percentage change represents an increase of 24.6%.

2014

Given,

Cash and cash equivalents in the beginning of 2014 is $9,815 million.

Cash and cash equivalents at the end of the year is $10,746 million.

Substitute $9,815 million for cash and cash equivalents in the beginning of the 2015 and $10,746 million at the end of the year,

$\begin{array}{c}\text{Percentage}\text{change}=\frac{\left(\$10,746\text{ million}-\$9,815\text{ million}\right)}{\$10,746\text{ million}}\times 100\\ =\frac{\$931\text{ million}}{\$10,746\text{ million}}\times 100\\ =8.7\%\end{array}$

Hence, percentage change represents a decrease of 8.7%.

3.

To determine

Day’s sales uncollected as of September 28, 2013 and September 29, 2012.

Explanation of Solution

Day’s sales uncollected imply how much days a company takes to collect its accounts receivables.

Formula to calculate day’s sales uncollected is:

$\text{Day's}\text{sales}\text{uncollected}=\left(\frac{\text{Accounts}\text{receivable}}{\text{Net}\text{sales}}\right)\times 365$

2013

Given,

Accounts receivable is $13,102 million.

Net sales are $170,910 million.

Substitute $13,102 million for accounts receivable, and $170,910 million for net sales,

$\begin{array}{c}\text{Day's}\text{sales}\text{uncollected}=\left(\frac{\$13,102\text{ million}}{\$170,910\text{ million}}\right)\times 365\\ =0.0767\times 365\\ =28\text{ days}\end{array}$

2012

Given,

Accounts receivable is $10,930 million.

Net sales are $156,508 million.

Substitute $10,930 million for accounts receivable, and $156,508 million for net sales,

$\begin{array}{c}\text{Day's}\text{sales}\text{uncollected}=\left(\frac{\$10,930\text{ million}}{\$156,508\text{ million}}\right)\times 365\\ =0.0698\times 365\\ =25.48\text{ days}\end{array}$

Hence, day’s sales uncollected are accounted for 2013 is 28 days and for 2012 is 25.48 days.

• Thus, it is concluded that A Company has declined its performance in order to collect its receivable as now it would take 2.52 more days to collect receivables.

• Accounts receivables are important part of the company as it indicates about the turnover. So, company should take steps for its improvements.

4.

To determine

Day’s sales uncollected as of September 26, 2015.

Explanation of Solution

Day’s sales uncollected imply how much days a company takes to collect its accounts receivables.

Given info,

Accounts receivable is $16,849 million.

Net sales are $233,715 million.

Formula to calculate day’s sales uncollected is,

$\text{Day's}\text{sales}\text{uncollected}=\left(\frac{\text{Accounts}\text{receivable}}{\text{Net}\text{sales}}\right)\times 365$

Substitute $16,849 million for accounts receivable and $233,715 million for net sales,

$\begin{array}{c}\text{Day's}\text{sales}\text{uncollected}=\left(\frac{\$16,849\text{ million}}{\$233,715\text{ million}}\right)\times 365\\ =0.072\times 365\\ =26.31\text{ days}\end{array}$

Hence, day’s sales uncollected are accounted for 26.31 days.

Thus, company would take 1.69 days more days to collect its receivables in the year 2013 (28 days) as compared to 2015 (26.31 days).