The Fisher Apparel Company balance sheet for the year ended Year 1 is as follows: December 31, Year 1 (in Thousands of Dollars) Assets Cash $4,280 Marketable securities 2,300 Accounts receivable 26,250 Inventories 39,605 Plant and equipment $71,650 Less: Accumulated depreciation 15,600 Net plant and equipment 56,050 Total assets $128,485 Liabilities and Stockholders’ Equity Accounts payable $12,066 Current portion of long-term debt 5,000 Accrued wages 800 Accrued taxes 2,400 Other current liabilities 2,800 Long-term debt 34,000 Common stock ($15 par) 22,500 Capital contributed in excess of par 19,100 Retained earnings 29,819 Total liabilities and stockholders’ equity $128,485 Determine Fisher’s return on stockholders’ equity if its Year 1 earnings after tax are $13,000(000). Round your answer to two decimal places.
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 Fisher Apparel Company balance sheet for the year ended Year 1 is as follows:
| December 31, Year 1 | ||
| (in Thousands of Dollars) | ||
| Assets | ||
| Cash | $4,280 | |
| Marketable securities | 2,300 | |
| Accounts receivable | 26,250 | |
| Inventories | 39,605 | |
| Plant and equipment | $71,650 | |
| Less: Accumulated |
15,600 | |
| Net plant and equipment | 56,050 | |
| Total assets | $128,485 | |
| Liabilities and |
||
| Accounts payable | $12,066 | |
| Current portion of long-term debt | 5,000 | |
| Accrued wages | 800 | |
| Accrued taxes | 2,400 | |
| Other current liabilities | 2,800 | |
| Long-term debt | 34,000 | |
| Common stock ($15 par) | 22,500 | |
| Capital contributed in excess of par | 19,100 | |
| |
29,819 | |
| Total liabilities and stockholders’ equity | $128,485 | |
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