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SITUATION

The following financial statements are for the Cherokee communications corporation , the company provides pay phone service at many of the small convenience stores in the southwestern unilted states primary in texas and new mexico the business was meeting plan until 2007 when a problem developed

BALANCE SHEET

 

2006

2007

ASSETS

 

 

Current assets:

 

 

Cash and cash equivalents

$      668,778

$       592,491

Accounts receivable

4,453,192

3,888,621

Inventories

137,036

112,699

Prepaid expenses and other current assets

411,990

407,274

Total current assets

$ 5,670,996

$ 5,001,085

Fixed assets:

 

 

Property, plant and equipment (net)

$12,935,453

$16,466,001

Site licenses

1,941,467

3,771,571

Investments in affiliates

164,549

251,672

Total fixed assets

$15,041,469

$20,489,244

Other assets

681,754

455,488

TOTAL ASSETS

$21,394,219

$25,945,817

DEBT (LIABILITIES) AND EQUITY

 

 

Current liabilities:

 

 

Notes payable

$ 2,151,371

S 3,320,197

Current portion of capital lease

1,094,381

668,826

Accounts payable

310,358

835,384

Accrued expenses

2,971,935

3,036,633

Income taxes payable

256,140

475,945

Total current liabilities

$ 6,784,185

S 8,336,985

 

Long-term liabilities:

 

 

Notes payable

$ 6,605,835

$10,030,963

Capital lease obligations

780,593

56,219

Deferred income taxes

342,359

306,021

Total long-term liabilities

$ 7,728,787

$10,393,203

Preferred stock

$ 2,400,000

$ 2,400,000

Common stockholders' equity:

 

 

Common stock

$ 1,438,903

$ 1,438,903

Additional paid-in capital

10,630

10,630

Retained earnings

3,031,714

3,366,096

Total ownership equity

$ 4,481,247

$ 4,815,629

TOTAL DEBT AND EQUITY

$21,394,219

525,945,817

Income Statements

 

2006

2007

Sales revenue

$31,591,640

$34,910,951

Operating expenses:

 

 

Telephone charges

$ 7,851,842

$     9,078,851

Commissions

4,909,445

5,627,288

Telecommunications fees

1,821,930

1,519,095

Depreciation

4,298,090

5,353,797

Field personnel

2,016,935

2,988,456

Chargebacks

1,104,896

1,111,857

General and administrative

expenses

5,520,405

6,435,919

Total operating
expenses

$27,523,543

$ 32,115,263

Operating Income

$ 4,068,097

$ 2,795,688

Interest expense

 

 

Other income

 

 

(expenses)

($1,631,416)

($1,816,222)

Interest income

57,278

5,069

Losses on affiliates

(34,608)

(108,556)

Unusual gains

1,160,238

27,234

Total other income

 

 

(expenses)

($448,508)

($1,892,475)

Income before taxes

$ 3,619,589

$      903,213

Income taxes

1,399,140

424,831

Net income

$ 2,220,449

S     478,382

Question 1 : Using financial ratios, compare the firm's financial performance for 2006 and 2007.

Question 2 : What do you think might have happened from 2006 to 2007?

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M91938093

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