Module 3 Critical Thinking Assignment
Understanding Financial Statements and Cash Flow (100 Points)
Complete the following problems. You will likely use a spreadsheet for this assignment but you may choose to type up your answers in a Word document. In either case, be sure to show your work.
Problem 3-1: Working with a Balance Sheet
Prepare a balance sheet from the following information. What is the net working capital and debt ratio?
DATA
|
Cash
|
75,000
|
|
Account receivables
|
64,050
|
|
Accounts payable
|
34,500
|
|
Short-term notes payable
|
15,750
|
|
Inventories
|
60,000
|
|
Gross fixed assets
|
1,920,000
|
|
Other current assets
|
7,500
|
|
Accumulated depreciation
|
468,000
|
|
Long-term debt
|
300,000
|
|
Common stock
|
735,000
|
|
Other assets
|
22,500
|
|
Retained earnings
|
?
|
Problem 3-2: Computing Cash Flows
Given the following information, prepare a statement of cash flows.
|
DATA
|
|
|
Increase in accounts receivable
|
75
|
|
Increase in inventories
|
90
|
|
Operating Income
|
225
|
|
Interest Expense
|
75
|
|
Increase in accounts payable
|
75
|
|
Dividends
|
45
|
|
Increase in common stock
|
60
|
|
Increase in net fixed assets
|
69
|
|
Depreciation Expense
|
36
|
|
Income taxes
|
51
|
|
Beginning cash
|
60
|
Problem 3-3: Working with the Statement of Cash Flows
Prepare a statement of cash flows from the following scrambled list of items.
|
DATA
|
|
|
|
Increase in inventories
|
|
17,500
|
|
Operating income
|
|
547,500
|
|
Dividends
|
|
72,500
|
|
Increase in accounts payables
|
|
107,500
|
|
Interest expense
|
|
112,500
|
|
Increase in common stock
|
|
12,500
|
|
Depreciation expense
|
|
42,500
|
|
Increase in accounts receivable
|
|
172,500
|
|
Increase in long-term debt
|
|
132,500
|
|
Increase in short-term notes payable
|
|
37,500
|
|
Increase in gross fixed assets
|
|
135,000
|
|
Increase in paid in capital
|
|
50,000
|
|
Income taxes
|
|
112,500
|
|
Beginning cash
|
|
625,000
|
Problem 3-4: Ratio Analysis
The Balance Sheet and Income Statement for Saudi Manufacturing Corporation are as follows:
|
DATA
|
|
|
Balance Sheet:
|
|
|
Cash
|
22,500
|
|
Acct/Rec
|
90,000
|
|
Inventories
|
45,000
|
|
Current assets
|
157,500
|
|
Net fixed assets
|
202,500
|
|
Total assets
|
360,000
|
|
|
|
Accts/Pay
|
49,500
|
|
Accrued expenses
|
27,000
|
|
Short-term N/P
|
13,500
|
|
Current liabilities
|
90,000
|
|
Long-term debt
|
90,000
|
|
Owner's equity
|
180,000
|
|
Total liabilities and owners' equity
|
360,000
|
|
|
|
Income Statement:
|
|
|
Net sales
|
360,000
|
|
COGS
|
148,500
|
|
Gross profit
|
211,500
|
|
Operating expenses
|
135,000
|
|
Net operating income
|
76,500
|
|
Interest expense
|
16,515
|
|
EBT
|
59,985
|
|
Income taxes
|
23,985
|
|
Net income
|
36,000
|
Problem 3-5: Market-Value Ratios
Jeddah Industries has a price earnings ratio of 18.69X.
a. If Jeddah's earnings per share are SAR 2.65, what is the price per share of Jeddah's stock?
b. Using the price per share you calculated in part a, determine the price / book ratio if Jeddah's equity-book value is SAR 12.67.
|
DATA
|
|
|
Price/earnings ratio
|
18.69X
|
|
Earnings per share (SAR)
|
2.65
|
|
Equity book value (SAR)
|
12.67
|
Problem 3-6: Computing Ratios
Use the information from the balance sheet and income statement below to calculate the ratios listed below:
|
DATA
|
|
| |
|
|
ASSETS
|
|
|
Cash
|
250,000
|
|
Accounts receivable
|
75,000
|
|
Inventory
|
125,000
|
|
Prepaid expenses
|
25,000
|
|
Total current assets
|
475,000
|
|
Gross plant and equipment
|
1,002,500
|
|
Accumulated depreciation
|
-165,000
|
|
Net plant and equipment
|
837,500
|
|
Total assets
|
1,312,500
|
|
DEBT AND EQUITY
|
|
|
Accounts payable
|
225,000
|
|
Accrued liabilities
|
157,500
|
|
Total current debt
|
382,500
|
|
Long-term debt
|
300,000
|
|
Common stock
|
512,500
|
|
Retained earnings
|
117,500
|
|
Total debt and equity
|
1,312,500
|
| |
|
|
Sales
|
525,000
|
|
Cost of goods sold
|
-225,000
|
|
Gross profit
|
300,000
|
|
Selling, general, and administrative expenses
|
-72,500
|
|
Depreciation expense
|
-65,000
|
|
Operating income
|
162,500
|
|
Interest expense
|
-20,000
|
|
Earnings before taxes
|
142,500
|
|
Taxes
|
-40,000
|
|
Earnings available to common shareholders
|
102,500
|