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Perform the common sizing analysis for 2019 and 2018. Comment on your observations on the changes in the percentages.   Focus on a) the change in the amount of total assets --- does this mean the firm is doing better?  Why or why not? b) the changes in current assets, current liabilities and what this could mean for the firm. c) the changes in debt:  what has increased more, total current liabilities or long-term debt?  d) the change in total common equity.  What has driven the change? e) the conundrum that although sales have nearly doubled, the firm makes a loss in 2019. What has caused this situation?

Perform the common sizing analysis for 2019 and 2018. Comment on your observations on the changes in the percentages.   Focus on a) the change in the amount of total assets --- does this mean the firm is doing better?  Why or why not? b) the changes in current assets, current liabilities and what this could mean for the firm. c) the changes in debt:  what has increased more, total current liabilities or long-term debt?  d) the change in total common equity.  What has driven the change? e) the conundrum that although sales have nearly doubled, the firm makes a loss in 2019. What has caused this situation?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Perform the common sizing analysis for 2019 and 2018. Comment on your observations on the changes in the percentages.

 

Focus on

a) the change in the amount of total assets --- does this mean the firm is doing better?  Why or why not?

b) the changes in current assets, current liabilities and what this could mean for the firm.

c) the changes in debt:  what has increased more, total current liabilities or long-term debt? 

d) the change in total common equity.  What has driven the change?

e) the conundrum that although sales have nearly doubled, the firm makes a loss in 2019. What has caused this situation?

A C E F G J K 1 D'LEON, INC. 3 BALANCE SHEET 4 5 2019 2018 2019 2018 CS 2019 6 Assets 7 Cash 8 Accounts receivable 9 Inventories 10 Total current assets 11 Gross fixed assets 12 Less: accumulated depreciation 13 Net fixed assets CS 2018 Liabilities and equity Accounts payable CS 2019 CS 2018 7,282 632,160 1,287,360 1,926,802 1,202,950 263,160 939,790 57,600 351,200 715,200 1,124,000 491,000 146,200 344,800 524,160 489,600 636,808 1,650,568 723,432 2,374,000 460,000 145,600 136,000 200,000 481,600 323,432 805,032 460,000 203,768 663,768 1,468,800 Accruals Notes payable Total current Iliabilities Long-term debt Total liabilities Common stock (100,000 shares) Retained earnings Total common equity Total liabilities and equity 14 32.592 15 16 Total assets 492,592 2,866,592 2,866,592 1,468,800 17 18 19 INCOME STATEMENT Perform the common sizing analysis for 2019 and 2018. Comment on your observations on the changes in the percentages. 20 21 2019 2018 22 CS 2019 CS 2018 Focus on 23 Sales 24 Cost of goods sold 25 Other expenses 26 Total operating expenses, excluding depreciation and amortization 27 EBITDA 28 Depreciation and amortization 29 Earnings before interest and taxes (EBIT) 30 Interest expense 31 Earnings before taxes (EBT) 32 Taxes (40%) 33 Net income 6,126,796 5,528,000 519,988 6,047,988 78,808 116,960 (38,152) 122,024 (160,176) 3,432,000 2,864,000 358,672 3,222,672 209,328 18,900 190,428 43,828 146,600 36,650 109,950 a) the change in the amount of total assets --- does this mean the firm is doing better? Why or why not? b) the changes in current assets, current liabilities and what this could mean for the firm. c) the changes in debt: what has increased more, total current liabilities or long-term debt? (160,176) 34 d) the change in total common equity. What has driven the change? 35 EPS 36 DPS 37 Book value per share 38 Stock price 39 Shares outstanding 40 Tax rate 41 Lease payments 42 Sinking fund payments (1.602) 0.110 1.100 0.275 4.926 6.638 8.50 100,000 0.25 2.25 e) the conundrum that although sales have nearly doubled, the firm makes a loss in 2019. 100,000 0.25 What has caused this situation? 40,000 40,000 43 44 STATEMENT OF STOCKHOLDERS' EQUITY 45 46 Common Stock Total 47 Retained Stockholders' 48 Shares Amount Earnings Equity 49 50 Balances, Dec. 31, 2018 Add: Net Income, 2019 100,000 460,000 203,768 (160,176) (11,000) 663,768 51 52 Less: Dividends to common stockholders 53 Addition (Subtraction) to Retained Earnings 54 Balances, Dec. 31, 2019 (171,176) 492,592 100,000 460,000 32,592 55 56 Cell for "-1" 57 Cell for "-1" -1 1 58
Transcribed Image Text:A C E F G J K 1 D'LEON, INC. 3 BALANCE SHEET 4 5 2019 2018 2019 2018 CS 2019 6 Assets 7 Cash 8 Accounts receivable 9 Inventories 10 Total current assets 11 Gross fixed assets 12 Less: accumulated depreciation 13 Net fixed assets CS 2018 Liabilities and equity Accounts payable CS 2019 CS 2018 7,282 632,160 1,287,360 1,926,802 1,202,950 263,160 939,790 57,600 351,200 715,200 1,124,000 491,000 146,200 344,800 524,160 489,600 636,808 1,650,568 723,432 2,374,000 460,000 145,600 136,000 200,000 481,600 323,432 805,032 460,000 203,768 663,768 1,468,800 Accruals Notes payable Total current Iliabilities Long-term debt Total liabilities Common stock (100,000 shares) Retained earnings Total common equity Total liabilities and equity 14 32.592 15 16 Total assets 492,592 2,866,592 2,866,592 1,468,800 17 18 19 INCOME STATEMENT Perform the common sizing analysis for 2019 and 2018. Comment on your observations on the changes in the percentages. 20 21 2019 2018 22 CS 2019 CS 2018 Focus on 23 Sales 24 Cost of goods sold 25 Other expenses 26 Total operating expenses, excluding depreciation and amortization 27 EBITDA 28 Depreciation and amortization 29 Earnings before interest and taxes (EBIT) 30 Interest expense 31 Earnings before taxes (EBT) 32 Taxes (40%) 33 Net income 6,126,796 5,528,000 519,988 6,047,988 78,808 116,960 (38,152) 122,024 (160,176) 3,432,000 2,864,000 358,672 3,222,672 209,328 18,900 190,428 43,828 146,600 36,650 109,950 a) the change in the amount of total assets --- does this mean the firm is doing better? Why or why not? b) the changes in current assets, current liabilities and what this could mean for the firm. c) the changes in debt: what has increased more, total current liabilities or long-term debt? (160,176) 34 d) the change in total common equity. What has driven the change? 35 EPS 36 DPS 37 Book value per share 38 Stock price 39 Shares outstanding 40 Tax rate 41 Lease payments 42 Sinking fund payments (1.602) 0.110 1.100 0.275 4.926 6.638 8.50 100,000 0.25 2.25 e) the conundrum that although sales have nearly doubled, the firm makes a loss in 2019. 100,000 0.25 What has caused this situation? 40,000 40,000 43 44 STATEMENT OF STOCKHOLDERS' EQUITY 45 46 Common Stock Total 47 Retained Stockholders' 48 Shares Amount Earnings Equity 49 50 Balances, Dec. 31, 2018 Add: Net Income, 2019 100,000 460,000 203,768 (160,176) (11,000) 663,768 51 52 Less: Dividends to common stockholders 53 Addition (Subtraction) to Retained Earnings 54 Balances, Dec. 31, 2019 (171,176) 492,592 100,000 460,000 32,592 55 56 Cell for "-1" 57 Cell for "-1" -1 1 58
STATEMENT OF CASH FLOWS 2019 1 Operating Activities Net Income (160,176) 116,960 378,560 353,600 (280,960) (572,160) (164,176) Depreciation and amortization Increase in accounts payable Increase in accruals Increase in accounts receivable Increase in inventories Net cash provided by operating activities O Long-Term Investing Activities Additions to property, plant, and equipment Net cash used in investing activities (711,950) (711,950) 4 Financing Activities Increase in notes payable Increase in long-term debt Payment of cash dividends Net cash provided by financing activities 436,808 400,000 (11,000) 825,808 O Summary 1 Net decrease in cash 2 Cash at beginning of the year B Cash at end of the year (50,318) 57,600 7,282
Transcribed Image Text:STATEMENT OF CASH FLOWS 2019 1 Operating Activities Net Income (160,176) 116,960 378,560 353,600 (280,960) (572,160) (164,176) Depreciation and amortization Increase in accounts payable Increase in accruals Increase in accounts receivable Increase in inventories Net cash provided by operating activities O Long-Term Investing Activities Additions to property, plant, and equipment Net cash used in investing activities (711,950) (711,950) 4 Financing Activities Increase in notes payable Increase in long-term debt Payment of cash dividends Net cash provided by financing activities 436,808 400,000 (11,000) 825,808 O Summary 1 Net decrease in cash 2 Cash at beginning of the year B Cash at end of the year (50,318) 57,600 7,282
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