Here are comparative financial statement data for Bonita Company and Linda Company, two competitors. All data are as of December 31, 2022, and December 31, 2021. Bonita Company Linda Company 2022 2021 2022 2021 Net sales $1,836,000 $561,000 Cost of goods sold 1,029,996 297,330 Operating expenses 269,892 79,662 Interest expense 9,180 4,488 Income tax expense 53,244 6,171 Current assets 326,500 $310,300 83,200 $78,000 Plant assets (net) 519,000 499,100 139,200 125,700 Current liabilities 65,000 75,600 36,200 29,600 Long-term liabilities 107,600 89,800 28,800 24,400 Common stock, $10 par 505,000 505,000 116,000 116,000 Retained earnings 167,900 139,000 41,400 33,700 Compute the 2022 return on assets and the return on common stockholders’ equity ratios for both companies. (Round answers to 1 decimal place, e.g. 12.1%.) Bonita Company Linda Company Return on assets enter percentages rounded to 1 decimal place % enter percentages rounded to 1 decimal place % Return on common stockholders’ equity enter percentages rounded to 1 decimal place % enter percentages rounded to 1 decimal place
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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Bonita Company
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Linda Company
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2022
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2021
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2022
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2021
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Net sales
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$1,836,000 | $561,000 | ||||||
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Cost of goods sold
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1,029,996 | 297,330 | ||||||
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Operating expenses
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269,892 | 79,662 | ||||||
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Interest expense
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9,180 | 4,488 | ||||||
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Income tax expense
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53,244 | 6,171 | ||||||
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Current assets
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326,500 | $310,300 | 83,200 | $78,000 | ||||
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Plant assets (net)
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519,000 | 499,100 | 139,200 | 125,700 | ||||
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Current liabilities
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65,000 | 75,600 | 36,200 | 29,600 | ||||
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Long-term liabilities
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107,600 | 89,800 | 28,800 | 24,400 | ||||
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Common stock, $10 par
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505,000 | 505,000 | 116,000 | 116,000 | ||||
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167,900 | 139,000 | 41,400 | 33,700 |
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Bonita Company
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Linda Company
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Return on assets
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enter percentages rounded to 1 decimal place | % | enter percentages rounded to 1 decimal place | % | ||
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Return on common stockholders’ equity
|
enter percentages rounded to 1 decimal place | % | enter percentages rounded to 1 decimal place | % |
Compute the 2022 return on assets and the return on common stockholders’ equity ratios for both companies. (Round answers to 1 decimal place, e.g. 12.1%.)
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Bonita Company
|
Linda Company
|
|||||
|---|---|---|---|---|---|---|
|
Return on assets
|
enter percentages rounded to 1 decimal place | % | enter percentages rounded to 1 decimal place | % | ||
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Return on common stockholders’ equity
|
enter percentages rounded to 1 decimal place | % | enter percentages rounded to 1 decimal place | % |
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