The following information is available for Crane Enterprises: 2014 2013 Current liabilities $168,000 $196,000 Long-term liabilities 272,000 336,000 Common stockholders' equity 732,000 880,000 Preferred stockholders’ equity 108,000 108,000 Dividends paid to common stockholders 38,400 33,600 Dividends paid to preferred stockholders 31,520 9,600 Interest expense 20,000 16,800 Net income 96,000 160,000 Income tax expense 34,000 43,200 Net sales 4,760,000 4,960,000 Common shares outstanding 64,000 59,200 Calculate each of the following for 2014. (Round last four answers to 1 decimal place, e.g. 527.5.) Payout ratio for 2014 enter the payout ratio for 2014 in percentages % Return on common stockholders’ equity for 2014 enter the return on common stockholders’ equity for 2014 in percentages % Times interest earned for 2014 enter the number of times interest earned for 2014 rounded to 1 decimal place times Debt to assets ratio for 2014 enter the debt to assets ratio for 2014 in percentages rounded to 1 decimal place % Return on assets for 2014 enter the return on assets for 2014 in percentages rounded to 1 decimal place % Asset turnover for 2014 enter the asset turnover for 2014 in number of times rounded to 1 decimal place times
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 following information is available for Crane Enterprises:
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|
2014
|
2013
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||
|---|---|---|---|---|
|
Current liabilities
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$168,000
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$196,000
|
||
|
Long-term liabilities
|
272,000
|
336,000
|
||
|
Common
|
732,000
|
880,000
|
||
|
Preferred stockholders’ equity
|
108,000
|
108,000
|
||
|
Dividends paid to common stockholders
|
38,400
|
33,600
|
||
|
Dividends paid to preferred stockholders
|
31,520
|
9,600
|
||
|
Interest expense
|
20,000
|
16,800
|
||
|
Net income
|
96,000
|
160,000
|
||
|
Income tax expense
|
34,000
|
43,200
|
||
|
Net sales
|
4,760,000
|
4,960,000
|
||
|
Common shares outstanding
|
64,000
|
59,200
|
Calculate each of the following for 2014. (Round last four answers to 1 decimal place, e.g. 527.5.)
|
Payout ratio for 2014
|
enter the payout ratio for 2014 in percentages %
|
|
Return on common stockholders’ equity for 2014
|
enter the return on common stockholders’ equity for 2014 in percentages %
|
|
Times interest earned for 2014
|
enter the number of times interest earned for 2014 rounded to 1 decimal place times
|
|
Debt to assets ratio for 2014
|
enter the debt to assets ratio for 2014 in percentages rounded to 1 decimal place %
|
|
Return on assets for 2014
|
enter the return on assets for 2014 in percentages rounded to 1 decimal place %
|
|
Asset turnover for 2014
|
enter the asset turnover for 2014 in number of times rounded to 1 decimal place times
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