I really need help with questions 3 and 4. making a, \"Statement of Cash Flow Pa
ID: 2532648 • Letter: I
Question
I really need help with questions 3 and 4. making a, "Statement of Cash Flow Page" and a "Analysis of the Financial Satement Sheet."
The Panama Pajama Company began operations on January 1, 2015, and is now in its third year of operations. The adjusted trial balance as of December 31, 2018 appears below, along with prior year balance sheet data and some additional transaction data for 2018. THE PANAMA PAJAMA COMPANY Adjusted Trial Balance 12/31/18 2017 Balance Sheet Info 2018 Account Title Adjusted Trial Balance Debit Credit Debit Credit $ 137,100 12,000 4,400 26,000 59,000 Cash Accounts Receivable Inventory Office Equipment Machinery&Tools; Accumulated Depreciation-Plant Assets Accounts Payable Note Payable-Short Term Note Payable-Long Term Common Stock, $10 par Retained Earnings Dividends Sales Revenue Cost of Goods Sold Rent Expense Advertising Expense Depreciation Expense S 35,700 11,000 5,600 20,000 21,000 $ 8,600 12,200 10,000 33,000 150,000 6,000 9,800 15,500 50,000 12,000 1,000 30,700 11,600 2,000 800 2,600 $256,500 $ 244,500 Transaction Data for 2018 (Note, these transactions were included in the trial balance numbers above.) Cash paid for purchase of office equipment Cash paid for purchase of tools Acquisition of Machinery with Notes Payable-Long-term Cash payment of dividends Cash receipt from issuance of 10,000 shares of common stock $ 6,000 5,000 33,000 1,000 100,000 Requirements: (See sheet tabs at bottom. Use each sheet for the following requirements.) Use Excel Skills in completing these requirements. You must use formulas and functions, cell references, and professional formatting 1. Prepare the Panama Pajama Company multi-step income statement for the year ended December 31, 2018. Include the EPS at the bottom. Also include a vertical analysis column at the right and perform a vertical analysis of the income statement. (Use percentage format with 1 decimal place.) 2. Prepare the Panama Pajama Company balance sheet for December 31, 2018. Include a vertical analysis column at the right and perform a vertical analysis of the balance sheet. (Use the percentage format with 1 decimal place.) 3. Prepare the Panama Pajama Company statement of cash flows for the year ended December 31, 2018. Use the indirect method. 4. Complete the analysis of the financial statements as directed on the Analysis sheetExplanation / Answer
1) Income statement
2. Balance Sheet
3) Cashflow Statement
4)
Requirement 2
The company is in a sound position to repay its current debt as well as the long term debt. This can be seen from the healthy current ratio of 6.91 and cash ratio of 6.18. Also the debt ratio of 0.14 is very low which augurs well.
Requirement 3
The Inventory turnover ratio of 2.32 is quite low and the Days sales in Inventory of 157 days is quite high. This means the company can do a better job of improving the Inventory turnover ratio and reduce the inventory days.
Requirement 4
There is room for improvement in the Receivable turnover ratio of 2.67 and Days sales in receivables of 137 days . The average collection time of 137 days is quite high.This means a high proportion of sales remains uncollected.
Requirement 5
The rate of return on total assets is 8.26% which is higher than the industry average of 6%. However theasset turnover ratio of 0.19 is very low when compared to the industry average 1,5
The rate of return on stock holders equity is 11.58%
The low asset turnover ratio indicates that the company has not utilized the assets efficiently.This may be because the company has made new investments which has not yet contributed to increase in sales.
Since the price earnings ratio is low at 5.49, this may be attractive to investors if the company is able to utilize the assets better by improving the sales.
Income Statement for year end 31 Dec 2018 $ % Sales 30700 100.0% Cost of goods sold -11600 -37.8% Gross Profit 19100 62.2% Rent -2000 -6.5% Advertising -800 -2.6% Depreciation -2600 -8.5% Net Profit 13700 44.6% Earnings pershare (EPS)=13700/15000shares 0.913