Problem 2-05A b (Essay)The following are financial statements of Ohara Company.Ohara CompanyIncome StatementFor the Year Ended December 31, 2022Net sales $2,218,500Cost of goods sold 1,012,400Selling and administrative expenses 906,000Interest expense 78,000Income tax expense 69,000Net income $ 153,100Ohara CompanyBalance SheetDecember 31, 2022Assets Current assets Cash $ 60,100 Debt investments 84,000 Accounts receivable (net) 169,800 Inventory 145,000 Total current assets 458,900Plant assets (net) 575,300Total assets $ 1,034,200Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 160,000 Income taxes payable 35,500 Total current liabilities 195,500Bonds payable 200,000 Total liabilities 395,500Stockholders’ equity Common stock 350,000 Retained earnings 288,700 Total stockholders’ equity 638,700Total liabilities and stockholders’ equity $1,034,200Additional information: The net cash provided by operating activities for 2022 was $190,800. The cash used for capital expenditures was $92,000. The cash used for dividends was $31,000. The weighted-average common shares outstanding during the year was 50,000.(i) Working capital. (2021: $160,500; 2022: $263,400)(ii) Current ratio. (2021: 1.65:1; 2022: 2.35:1)(iii) Free cash flow. (2021: $48,700; 2022: $67,800)(iv) Debt to assets ratio. (2021: 31%; 2022: 38.2%)(v) Earnings per share. (2021: $3.15; 2022: $3.06)(b)Discuss changes from 2021 in liquidity, solvency, and profitability.type your answer here:

Liquidity ratio: It helps a firm to measure its ability to pay off their current debt obligations…

Answered: Discuss changes from 2021 in liquidity,…

Financial & Managerial Accounting

13th Edition

ISBN:9781285866307

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter14: Statement Of Cash Flows

Section: Chapter Questions

Problem 14.3BPE

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Problem 2-05A b (Essay)

The following are financial statements of Ohara Company.

Ohara Company Income Statement For the Year Ended December 31, 2022
Net sales		$2,218,500
Cost of goods sold		1,012,400
Selling and administrative expenses		906,000
Interest expense		78,000
Income tax expense		69,000
Net income		$ 153,100

Ohara Company Balance Sheet December 31, 2022
Assets
Current assets
Cash		$ 60,100
Debt investments		84,000
Accounts receivable (net)		169,800
Inventory		145,000
Total current assets		458,900
Plant assets (net)		575,300
Total assets		$ 1,034,200
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		$ 160,000
Income taxes payable		35,500
Total current liabilities		195,500
Bonds payable		200,000
Total liabilities		395,500
Stockholders’ equity
Common stock		350,000
Retained earnings		288,700
Total stockholders’ equity		638,700
Total liabilities and stockholders’ equity		$1,034,200

Additional information: The net cash provided by operating activities for 2022 was $190,800. The cash used for capital expenditures was $92,000. The cash used for dividends was $31,000. The weighted-average common shares outstanding during the year was 50,000.

(i)		Working capital. (2021: $160,500; 2022: $263,400)
(ii)		Current ratio. (2021: 1.65:1; 2022: 2.35:1)
(iii)		Free cash flow. (2021: $48,700; 2022: $67,800)
(iv)		Debt to assets ratio. (2021: 31%; 2022: 38.2%)
(v)		Earnings per share. (2021: $3.15; 2022: $3.06)

(b)

Discuss changes from 2021 in liquidity, solvency, and profitability.

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