Warner Company Income Statement

3-13

Problem 3-13
Warner Company Balance Sheet Warner Company Income Statement
Current Assets Recall from reading checkpoint 3.1
to construct an income statement
in this space, adjusting as needed.
(You may delete these instructions.)
Long Term (fixed) assets
Current Liabilities
Long-term Liabilities
Owners Equity
Total liabilities and equity
Q. What can you say about the firm’s financial condition based on these financial statements?
Q. Using the CSU Online Library find one article that discusses financial statements, cash flow, or ratio analysis. Briefly summarize the key points of the article as it relates to this unit. You may use any of the databases, but Business Source Complete is a good starting place.

3-15

Problem 3-15
Answer the following four questions using the information found in the statements.
a. Does BigBox generate positive cash flow from its operations?
b. How much did BigBox invest in new capital expenditures over the last four years?
c. Describe BigBox’s sources of financing in the financial markets over the last four years.
d. Based solely on the cash flow statement for 2010 through 2013, write a brief narrative that describes the major activities of BigBox’s management team over the last four years.

4-25

Problem 4-25
Instructions to use the Solution Template
Step 1 Enter the given values from the textbook on page 116 in the yellow colored cells below.
Step 2 In Cell E52, Calculate Current ratio using formula “Current Assets / Current Liabilities”
Step 3 In Cell E53, Calculate Times interest earned using formula “Net Operating Income/ Interest Expense”
Step 4 In Cell E54, Calculate Inventory Turnover using formula “Cost of goods sold/ Inventory”
Step 5 In Cell E55, Calculate Total Asset turn Over using formula “Net Sales / Total Assets”
Step 6 In Cell E56, Calculate Operating Profit Margin using formula “Net Operating Income / Net Sales”
Step 7 In Cell E57, Calculate Operating Return on Assets using formula “Net Operating Income / Total Assets”
Step 8 In Cell E58, Calculate Debt Ratio using formula “( Current Liabilities + Long-term debt) / Total Assets”
Step 9 In Cell E59, Calculate Average Collection Period using formula “( Accounts Receivable * 365 ) / Credit Sales “
Step 10 In Cell E60, Calculate Fixed Asset Turnover using formula “Net Sales / Net Fixed Assets “
Step 11 In Cell E61, Calculate Return on Equity using formula “Net Income / Owner’s Equity”
Given
J. P. Robard Mfg., Inc.
Balance Sheet ($000)
Cash
Author: Enter the given values from the text book here Accounts receivable
Inventories
Current assets
Net fixed assets
Total assets
Accounts payable
Accrued expenses
Short-term notes payable
Current liabilities
Long-term debt
Owners’ equity
Total liabilities and owners’ equity
J. P. Robard Mfg., Inc.
Income Statement ($000)
Net sales (all credit)
Cost of goods sold
Gross profit
Operating expenses (includes $500 depreciation)
Net operating income
Interest expense
Earnings before taxes
Income taxes (40%)
Net income
Solution
Current ratio
Author: Current Ratio = Current Assets / Current Liabilities Times interest earned
Author: Times interest Earned= Net Operating Income/ Interest Expense Inventory turnover
Author: Inventory Turnover= Cost of goods sold/ Inventory Total asset turnover
Author: Total Asset turn Over = Net Sales / Total Assets Operating profit margin
Author: Operating Profit Margin = Net Operating Income / Net Sales Operating return on assets
Author: Operating Return on Assets = Net Operating Income / Total Assets Debt ratio
Author: Debt Ratio = ( Current Liabilities + Long-term debt) / Total Assets Average collection period
Author: Average Collection Period =( Accounts Receivable * 365 ) / Credit Sales Fixed asset turnover
Author: Fixed Asset Turnover = Net Sales / Net Fixed Assets Return on equity
Author: Return on Equity = Net Income / Owner’s Equity