Summary information from the financial statements of two companies competing in the same industry follows. Кyan Company Company Barco Barco Кyan Company Data from the current year-end balance sheets Company Data from the current year's income statement Assets Sales $770,000 $880,200 585,100 632,500 7,900 14,800 Cash $ 19,500 $ 34,000 Cost of goods sold 13,000 24,300 Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net 46,500 84,440 132,500 5,000 290,000 304,400 64,600 Interest expense Income tax expense 6,950 Net income Basic earnings per share 162,200 210,400 4.51 51.11 Total assets $445,440 $542,450 Cash dividends per share 3.81 3.93 Liabilities and Equity Current liabilities Long-term notes payable Common stock, $5 par value Retained earnings Beginning-of-year balance sheet data $ 61,340 $ 93,300 Accounts receivable, net 80,800 180,000 123,300 $ 29,800 $ 54,200 55,600 101,000 Merchandise inventory 206,000 Total assets 142,150 107,400 398,000 382,500 180,000 Common stock, $5 par value 206,000 Total liabilities and equity $445,440 $542,450 Retained earnings 98,300 93,600
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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