The comparative statements of Osborne Company are presented here: [{HtmlTable OSBORNE COMPANY Income Statements For the Years Ended December 31 2014 2013 Net sales $1,895,999 $1,755,959 Cost of goods sold 1,063,999 1,011,459 Gross profit 832,000 744,500 Selling and administrative expenses 505,459 484,459 Income from operations 326,541 260,041 Other expenses and losses Interest expense 23,583 21,583 Income before income taxes 302,958 238,458 Income tax expense 93,583 74,583 Net income $209,375 $163,875 \\ OSBORNE COMPANY Balance Sheets December 31 Assets 2014 2013 Current assets Cash $60,100 $64,200 Debt investments (short-term) 74,000 50,000 Accounts receivable 123,259 108,259 Inventory 127,583 117,083 Total current assets 384,942 339,542 Plant assets (net) 663,905 535,205 Total assets $1,048,847 $874,747 Liabilities and Stockholders' Equity Current liabilities Accounts payable $165,459 $150,859 Income taxes payable 45,083 43,583 Total current liabilities 210,542 194,442 Bonds payable 234,905 214,905 Total liabilities 445,447 409,347 Stockholders' equity Common stock ($5 par) 290,000 300,000 Retained earnings 313,400 165,400 Total stockholders' equity 603,400 465,400 Total liabilities and stockholders' equity $1,048,847 $874,747 }] All sales were on account. Net cash provided by operating activities for 2014 was $235,290. Capital expenditures were $136,100, and cash dividends were $61,375. Compute the following ratios for 2014. a) Earnings per share b) Return on common stockholders' equity c) Return on assets d) Current ratio e) Accounts receivable turnover f) Average collection period g) Inventory turnover h) Days in inventory i) Times interest earned j) Asset turnover k) Debt to assets l) Current cash debt coverage m) Cash debt coverage n) Free cash flow
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.
The comparative statements of Osborne Company are presented here: [{HtmlTable
OSBORNE COMPANY
Income Statements
For the Years Ended December 31
2014 2013
Net sales $1,895,999 $1,755,959
Cost of goods sold 1,063,999 1,011,459
Gross profit 832,000 744,500
Selling and administrative expenses 505,459 484,459
Income from operations 326,541 260,041
Other expenses and losses
Interest expense 23,583 21,583
Income before income taxes 302,958 238,458
Income tax expense 93,583 74,583
Net income $209,375 $163,875
\\
OSBORNE COMPANY
Balance Sheets
December 31
Assets 2014 2013
Current assets
Cash $60,100 $64,200
Debt investments (short-term) 74,000 50,000
Inventory 127,583 117,083
Total current assets 384,942 339,542
Plant assets (net) 663,905 535,205
Total assets $1,048,847 $874,747
Liabilities and
Current liabilities
Accounts payable $165,459 $150,859
Income taxes payable 45,083 43,583
Total current liabilities 210,542 194,442
Bonds payable 234,905 214,905
Total liabilities 445,447 409,347
Stockholders' equity
Common stock ($5 par) 290,000 300,000
Total stockholders' equity 603,400 465,400
Total liabilities and stockholders' equity $1,048,847 $874,747
}] All sales were on account. Net cash provided by operating activities for 2014 was $235,290. Capital expenditures were $136,100, and cash dividends were $61,375. Compute the following ratios for 2014. a) Earnings per share b) Return on common stockholders' equity c) Return on assets d)
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
