Tanesha D Company Limited makes sales of $6,900,000 over the 2019 fiscal period. If the company states the following financials: Costs of goods sold $4,200,000.00 Depreciation expenses $235,000.00 Interest expenses $85,000.00 Preferred stocks dividends $10,800.00 Use the figures above to complete the income statement on the next page and perform calculations. Copy and Update the Income Statement Updated income statement of Tanesha D Company for the year ended December 31, 2019 Tanesha D Company Income Statement for the Year Ended December 31, 2019 Sales Revenue 6,900,000.00 Less Cost of Goods Sold -4,200,000.00 Gross Profit 2,700,000.00 Less Operating Expenses Sales Expenses $750,000.00 General Administrative expense $1,150,00.00 Lease Expenses $ 210,00.00 Depreciation Expenses 235,000.00 Total Operating Expenses -2,345,000.00 Earnings before Interest Taxes 355,000.00 Less Interest Expenses -85,000.00 Net Profit Before tax $270,000.00 Less Taxes 9rate 40%) $81,000.00 Net Profit after tax $189,000.00 Less preferred stock dividends -10,800.00 Net Income $178,200.00 Earnings per share (EPS) 1.43 Calculate the current ratio Ans: Current Ratio = 1.74 Current Ratio = Current Asset / Current Liabilities = 1850000 / 1060000 = 1.74 Calculate the Average collection period Ans: Average Collection Period = 34.38 days Accounts Receivable / Net Sales x 365 = 650000/ 6900000 x 365 = 34.38 Determine the Time interest earned Determine the Debt-to-Equity ratio Determine the ROE using the DuPont mod
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.
Tanesha D Company Limited makes sales of $6,900,000 over the 2019 fiscal period.
If the company states the following financials:
- Costs of goods sold $4,200,000.00
Depreciation expenses $235,000.00- Interest expenses $85,000.00
- Preferred stocks dividends $10,800.00
Use the figures above to complete the income statement on the next page and perform calculations.
- Copy and Update the Income Statement
Updated income statement of Tanesha D Company for the year ended December 31, 2019
|
Tanesha D Company Income Statement for the Year Ended December 31, 2019 |
|
|
Sales Revenue |
6,900,000.00 |
|
Less Cost of Goods Sold |
-4,200,000.00 |
|
Gross Profit |
2,700,000.00 |
|
Less Operating Expenses |
|
|
Sales Expenses |
$750,000.00 |
|
General Administrative expense |
$1,150,00.00 |
|
Lease Expenses |
$ 210,00.00 |
|
Depreciation Expenses |
235,000.00 |
|
Total Operating Expenses |
-2,345,000.00 |
|
Earnings before Interest Taxes |
355,000.00 |
|
Less Interest Expenses |
-85,000.00 |
|
Net Profit Before tax |
$270,000.00 |
|
Less Taxes 9rate 40%) |
$81,000.00 |
|
Net Profit after tax |
$189,000.00 |
|
Less |
-10,800.00 |
|
Net Income |
$178,200.00 |
|
|
|
|
Earnings per share (EPS) |
1.43 |
|
|
|
- Calculate the
current ratio
Ans: Current Ratio = 1.74
Current Ratio = Current Asset / Current Liabilities
= 1850000 / 1060000
= 1.74
- Calculate the Average collection period
Ans: Average Collection Period = 34.38 days
Accounts Receivable / Net Sales x 365
= 650000/ 6900000 x 365
= 34.38
- Determine the Time interest earned
- Determine the Debt-to-Equity ratio
- Determine the ROE using the DuPont model
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