Acc/300 Week 4

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P2-6B Condensed balance sheet and income statement data for Fellenz Corporation are presented below. FELLENZ CORPORATION
Balance Sheets
December 31
Assets 2012 2011
Cash $40,000 $24,000
Receivables (net) 90,000 55,000
Other current assets 74,000 73,000
Long-term investments 78,000 60,000
Plant and equipment (net) 520,000 407,000
Total assets $802,000$619,000

Liabilities and Stockholders’ Equity 2012 2011 Current liabilities $88,000 $65,000
Long-term debt 90,000 70,000
Common stock 370,000 320,000
Retained earnings 254,000 164,000
Total liabilities and stockholders’ equity $802,000 $619,000

FELLENZ CORPORATION
Income Statements
For the Years Ended December 31
2012 2011
Sales$770,000$800,000
Cost of goods sold 420,000 400,000
Operating expenses (including income taxes) 200,000 237,000 Net income $150,000 $163,000

Cash from operating activities $165,000 $178,000
Cash used for capital expenditures 85,000 45,000 Dividends paid 50,000 43,000

Average number of shares outstanding 370,000 320,000

Instructions
Compute the following values and ratios for 2011 and 2012.
(a) Earnings per share.

20112012
$163,000 =$.51 $150,000 =$.41
320,000 shares 370,000 shares

(b) Working capital.

20112012
($24,000 + $55,000 + $73,000) ($40,000 + $90,000 + $74,000) - $65,000 = $87,000 - $88,000 = $116,000 (c) Current ratio.

20112012
$152,000 = 2.34:1 $204,000 = 2.32:1
$65,000 $88,000

(d) Debt to total assets ratio.

20112012
$135,000= 21.8% $178,000 = 22.2%
$619,000 $802,000

(e) Free cash flow.

20112012
$178,000 - $45,000 - $43,000 $165,000 - $85,000 - $50,000
= $90,000 = $30,000

(f) Based on the ratios calculated, discuss briefly the improvement or lack thereof in the financial position and operating results of Fellenz from 2011 to 2012.

The profitability of this corporation overall has declined. The evidence of this is valued by earning per share which has dropped from 2011 to 2012. The increase in working capital indicates a drop in liquidity. The corporation is increasing its debt to assets resulting in a decrease in solvency; also looking at the cash flow drop indicates a decrease of solvency as well.

P13-3B The condensed balance sheet and income statement data for Finch Corporation are presented below. FINCH CORPORATION
Balance Sheets
December 31

2012 2011 2010
Cash $30,000 $24,000 $20,000 Receivables (net) 110,000 48,000 48,000 Other current assets 80,000 78,000 62,000 Investments 90,000 70,000 50,000

Plant and equipment (net) 503,000 400,000 360,000 $813,000 $620,000 $540,000 Current liabilities $98,000 $75,000 $70,000 Long-term debt 130,000 75,000 65,000

Common stock, $10 par 400,000 340,000 300,000 Retained earnings 185,000 130,000 105,000 $813,000 $620,000 $540,000

FINCH CORPORATION
Income Statements
For the Years Ended December 31

2012 2011
Sales...
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