Use the following information for the Exercises below. (Algo) [The following information applies to the questions displayed below.] Simon Company's year-end balance sheets follow. At December 31 Current Year 1 Year Ago 2 Years Ago Assets $ 33,783 97,913 125,594 10,989 310,097 $ 578,376 $ 39,888 71,898 89,474 10,785 286,555 $ 39,900 56,491 58,411 4,616 256,082 $ 415,500 Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets $ 498,600 Liabilities and Equity Accounts payable Long-term notes payable Common stock, $10 par value Retained earnings $ 54,298 $ 144,016 109,822 163,500 161,038 $ 81,735 113,531 163,500 139,834 $ 498,600 91,826 163,500 105,876 Total liabilities and equity $ 578,376 $ 415,500 For both the current year and one year ago, compute the following ratios: Exercise 17-10 (Algo) Analyzing efficiency and profitability LO P3 The company's income statements for the current year and 1 year ago, follow. For Year Ended December 31 Current Year 1 Year Ago Sales $ 751,889 $ 593,334 Cost of goods sold Other operating expenses Interest expense $ 458,652 233,086 12,782 9,775 $385,667 150,114 13,647 8,900 Income tax expense Total costs and expenses 714,295 558,328 Net income $ 37,594 $ 35,006 Earnings per share $ 2.31 $ 2.15 For both the Current Year and 1 Year Ago, compute the following ratios: (1-a) Profit margin ratio. (1-b) Did profit margin improve or worsen in the Current Year versus 1 Year Ago? (2) Total asset turnover. (3-a) Return on total assets. (3-b) Based on return on total assets, did Simon's operating efficiency improve or worsen in the Current Year versus 1 Year Ago?
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 following information for the Exercises below. (Algo)
[The following information applies to the questions displayed below.]
Simon Company's year-end balance sheets follow.
At December 31
Current Year
1 Year Ago
2 Years Ago
Assets
$ 33,783
$ 39,888
71,898
89,474
Cash
Accounts receivable, net
Merchandise inventory
Prepaid expenses
97,913
125,594
10,989
310,097
$39,900
56,491
58,411
4,616
256,082
10,785
Plant assets, net
286,555
Total assets
$ 578,376
$ 498,600
$ 415,500
Liabilities and Equity
Accounts payable
Long-term notes payable
Common stock, $10 par value
Retained earnings
$ 144,016
109,822
$ 81,735
113,531
163,500
139,834
$ 54,298
91,826
163,500
105,876
163,500
161,038
$ 578,376
Total liabilities and equity
$ 498,600
$ 415,500
For both the current year and one year ago, compute the following ratios:
Exercise 17-10 (Algo) Analyzing efficiency and profitability LO P3
The company's income statements for the current year and 1 year ago, follow.
For Year Ended December 31
Current Year
1 Year Ago
Sales
$ 751,889
$ 593,334
$ 458,652
$ 385,667
Cost of goods sold
Other operating expenses
233,086
12,782
9,775
150,114
13,647
Interest expense
Income tax expense
8,900
Total costs and expenses
714,295
558,328
Net income
$ 37,594
$ 35,006
Earnings per share
$ 2.31
$ 2.15
For both the Current Year and 1 Year Ago, compute the following ratios:
(1-a) Profit margin ratio.
(1-b) Did profit margin improve or worsen in the Current Year versus 1 Year Ago?
(2) Total asset turnover.
(3-a) Return on total assets.
(3-b) Based on return on total assets, did Simon's operating efficiency improve or worsen in the Current Year versus 1 Year Ago?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3b88b868-363a-465f-b48a-c6be48716ff6%2F8bf5670b-825a-4c71-a0ed-2be3f32ef9c6%2Fvs9nchh_processed.jpeg&w=3840&q=75)
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