Use the financial statements of Heifer Sports Inc. to find the following (assume 365 days a year, round to 2 decimal places): Income Statement 2020 Sales $5,630,000 Cost of Goods Sold $2,936,000 Depreciation $289,400 Selling and Admin. Expenses $1,550,000 EBIT $854,600 Interest Expense $138,000 Taxable Income $716,600 Taxes $320,300 Net Income $396,300 Balance Sheet, Year End 2020 2019 Assets Cash $48,400 $54,000 Accounts receivable $649,000 $932,200 Inventory $481,800 $648,400 Total current assets $1,179,200 $1,634,600 Fixed assets $3,060,000 $3,793,000 Total assets $4,239,200 $5,427,600 Liabilities and Stockholders' Equity Accounts payable $336,400 $623,000 Short-term debt $491,000 $762,200 Total current liabilities $827,400 $1,385,200 Long-term bonds $2,282,400 $3,049,300 Total liabilities $3,109,800 $4,434,500 Common stock $313,900 $313,900 Retained earnings $815,500 $679,200 Total stockholders' equity $1,129,400 $993,100 Total liabilities and stockholders' equity $4,239,200 $5,427,600 a. Cash flow from operating activities in 2020 $? b. Operating profit margin ?% c. Return on equity ?% d. Compound leverage ratio ? e. Net cash provided by operating activities ?
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.
Use the financial statements of Heifer Sports Inc. to find the following (assume 365 days a year, round to 2 decimal places):
| Income Statement | 2020 |
| Sales | $5,630,000 |
| Cost of Goods Sold | $2,936,000 |
| Depreciation | $289,400 |
| Selling and Admin. Expenses | $1,550,000 |
| EBIT | $854,600 |
| Interest Expense | $138,000 |
| Taxable Income | $716,600 |
| Taxes | $320,300 |
| Net Income | $396,300 |
| Balance Sheet, Year End | 2020 | 2019 |
| Assets | ||
| Cash | $48,400 | $54,000 |
| Accounts receivable | $649,000 | $932,200 |
| Inventory | $481,800 | $648,400 |
| Total current assets | $1,179,200 | $1,634,600 |
| Fixed assets | $3,060,000 | $3,793,000 |
| Total assets | $4,239,200 | $5,427,600 |
| Liabilities and |
||
| Accounts payable | $336,400 | $623,000 |
| Short-term debt | $491,000 | $762,200 |
| Total current liabilities | $827,400 | $1,385,200 |
| Long-term bonds | $2,282,400 | $3,049,300 |
| Total liabilities | $3,109,800 | $4,434,500 |
| Common stock | $313,900 | $313,900 |
| Retained earnings | $815,500 | $679,200 |
| Total stockholders' equity | $1,129,400 | $993,100 |
| Total liabilities and stockholders' equity | $4,239,200 | $5,427,600 |
| a. Cash flow from operating activities in 2020 | $? |
| b. Operating profit margin | ?% |
| c. |
?% |
| d. Compound leverage ratio | ? |
| e. Net cash provided by operating activities | ? |
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