Please answer the questions below: 1. Construct a statement of financial positio
ID: 2616451 • Letter: P
Question
Please answer the questions below:
1. Construct a statement of financial position (balance sheet) for the Humperdink family using the following information:
cash
$50
Checking account
$2,500
student loan balance
$6,000
stocks and bonds
$2,600
savings account
$5,850
residence
$110,000
automobile
$12,000
savings account
$5,800
automobile loan balance
$12,000
401K retirement account
$15,000
furniture, clothing, jewelry
$8,000
credit card balance
$4,000
mortgage loan balance
$99,000
2. What is the purpose of financial statement analysis? How do the three types of financial statement analysis differ from each other and when is each used?
3. Samantha Knight is applying for a small-business loan. She provides the bank with the following information:
cash in checking accounts
$5,000
cash in savings
$10,350
home market value
$145,500
first mortgage on house
$25,000
home equity loan limit
$70,000
home equity loan
$10,000
automobile market value
$19,000
automobile loan outstanding
$15,000
credit card debt
$1,500
a. Calculate the debt-to-asset ratio.
b. Calculate the debt-to-equity ratio.
c. What percentage of Samantha's assets is owned by others?
4. Given the profit loss (income statement) and balance sheet for Sam's Sandwich Delivery (see attached picture below), answer the following:
a. Calculate the following ratios: current, quick, accounts receivable turnover, fixed asset turnover.
b. Using the inventory figure on the balance sheet as average inventory, calculate the inventory turnover ratio.
c. Calculate the debt-to-equity ratio, debt-to-total asset ratio, and operating profit margin ratio.
d. Perform a vertical analysis of the income statement.
e. Perform a vertical analysis of the balance sheet.
f. Based on your analysis, would you consider investing in Sam's Sandwich Delivery?
cash
$50
Checking account
$2,500
student loan balance
$6,000
stocks and bonds
$2,600
savings account
$5,850
residence
$110,000
automobile
$12,000
savings account
$5,800
automobile loan balance
$12,000
401K retirement account
$15,000
furniture, clothing, jewelry
$8,000
credit card balance
$4,000
mortgage loan balance
$99,000
Exercises and Probs 121 TABLE 4-8 Financial Statements for Sam's Sandwich Delivery Profit Loss (Income Statement) for Six Months Ending June 30, 2013 Revenues Retail Sales $68,283 Wholesale Sales Total Revenues Cost of Sales Gross Profit 104,417 52,067 111,117 $172,700 $120,633 $ 9,516 Total Operating Expenses Operating Profit Other Income/Expenses Interest Income Interest Expense Depreciation-Store Equipment (651) 902 Total Other Income/Expenses Net Profit 8,614 Balance Sheet as of 06-30-2013 Assets Current Assets Change Fund Cash in Bank-Checking Cash in Bank-Savings Accounts Receivable Inventories $ 569 8,612 9,622 6,843 2,607 $28,253 Total Current Assets Fixed Assets 4,296 4,110 68,293 67,725 31,168 11,571 Furniture and Fixtures Less: Accum Depreciation Equipment 186 568 19,597 Less: Accum Depreciation Transportation Equipment Less: Accum Depreciation Total Fixed Assets Total Assets $20,351 $48,604 Current Liabilities Accounts Payable Trade Accrued Payroll Taxes Accrued Sales Taxes 6,208 3,464 987 Total Current Liabilities $10,659 Long-Term Liabilities Auto Loans Payable 18,626 Total Long-Term Liabilities $18,626 $29,285 Total Liabilities Stockholder's Equity 83,081 (72,376) 8,614 Common Stock Retained Earnings Net Profit/Loss Total Equity Total Liabilities and Equity 19,319 48,604Explanation / Answer
1) Balance Sheet for the Humperdink Liability (In $) Assets (In $) Cash 50 Student Loan Balance 6000 Checking account 2500 Automobile Loan Balance 12000 Savings account 11650 Credit Card Balance 4000 Total Cash and cash equivalents 14200 Mortgage Loan Balance 99000 Total Liabilities 121000 Stock and Bonds 2600 401K Retirement account 15000 Net worth 40800 Total Investments 17600 Residence 110000 Automobile 12000 Furniture,clothing, jewelry 8000 Fixed Assets 130000 Total Liabilities and net worth 161800 161800 2 Financial Analysis is done to understand the financial position of the company the assets, liabilities and the various ratios of the companies. The Balance Sheet is used by both external and internal users. External users use the balance sheet to understand the financial position and the potential investment they can make in the company and the return they would earn on the investment. Internally it is users by business owners and management to monitor and contril the financial position 3 Balance Sheet for Samantha Knight Liability (In $) Assets (In $) Cash in Checking account 5000 First Mortgage on house 25000 Cash in Savings 10350 Home Equity Loan 10000 Total cash and cash equivalents 15350 Automobile Loan outstanding 15000 Credit Card debt 1500 Home Market Value 145500 Total Liability 51500 Automobile 19000 Networth 128350 Total Liabilities and Net worth 179850 179850 a Debt to Asset Ratio 51500/179850 0.29 b Debt to Equity 51500/128350 0.40 c Total assets 179850 Owned by others 164500 Assets owned by others 0.91 4 a Current Ratio 28253/10659 2.65 Quick Ratio (28253-2607)/10659 2.41 Accounts receivable turnover 172700/6843 25.24 Fixed Asset turnover 172700/20351 8.49 b Inventory turnover ratio 172700/2607 66.24 c Debt to Equity Ratio 29285/19319 1.52 Debt to total assets 29285/48604 0.60 Operating profit margin 9516/172700 0.06 Vertical Analysis Profit/Loss(income statement) for six months ending June 30,2013 Revenues Retail Sales 68283 Wholesale Sales 104417 Total Revenues 172700 100.00% Cost of Sales 52067 30.15% Gross Profit 120633 69.85% Total Operating expenses 111117 64.34% Operating profit 9516 5.51% Other Income/Expenses Interest Income 41 Interest Expense -651 Depreciation-Store Equipment -292 Total Other Income/Expenses -902 Net Profit 8614 4.99% Horizontal Analysis Balance Sheet as on 06-30-2013 Assets Current Assets Change Fund 569 Cash in Bank-checking 8612 Cash in Bank-savings 9622 Accounts Receivable 6843 Inventories 2607 Total Current Assets 28253 58.13% Fixed Assets Furniture and Fixtures 4296 Less : Accum Depreciation 4110 186 Equipment 68293 Less : Accum Depreciation 67725 568 Transportation Equipment 31168 Less : Accum Depreciation 11571 19597 Total Fixed Assets 20351 41.87% Total Assets 48604 100.00% Current Liabilities Accounts Payable Trade 6208 Accrual Payroll Taxes 3464 Accrued Sales Taxes 987 10659 21.93% Long Term Liabilities Auto Loans Payable 18626 Total Long Term Liabilities 18626 38.32% Total Liabilities 29285 60.25% Stockholders Equity Common Stock 83081 Retained Earnings -72376 Net Profit/Loss 8614 39.75% Total Equity 19319 Total Liabilities and Equity 48604 100.00%