1. Compute the financial ratios discussed in the chapter for Wholesome Foods for 2014 and 2015.

2. Prepare a cash flow statement for the firm for 2014 and 2015.

 

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ofitable, but Abrahams has been disap- of cash flows. She had hoped to have about ailable for personal living expenses. However, there never seems to be much cash available for purposes other than business needs. Abrahams has asked you to examine the financial statements and explain why, although they show prof- its, she does not have any discretionary cash for personal needs. She observed, "I thought that I could take the profits and add back depreciation to find out how much cash I was generating. However, that doesn't seem to be the case. What's happening?" Question 1 Given the information provided by the financial statements, what would you tell Abrahams? (As part of your answer, calculate the firm's cash flows.) Question 2 How would you describe the cash flow pattern for the Maitz Company? Assets Cash Accounts receivable Inventory Prepaid rent Total current assets Gross property, plant, and equipment. Accumulated depreciation Net property, plant, and equipment TOTAL ASSETS Debt (Liabilities) and Equity Accounts payable Accrued expenses Short-term notes Total current liabilities Long-term debt Common stock Retained earnings Total owners' equity TOTAL DEBT AND EQUITY Income Statement Sales Cost of goods sold Gross profits Operating expenses: General and administrative expenses Depreciation expense Total operating expenses Situation 3 Philip Spencer, the owner of Wholesome Foods, has hired you to evaluate his firm's financial performance. The firm's financial data is provided below, along with an average for the financial ratios that Spencer collected on several competing peer firms. Question 1 Compute the financial ratios discussed in the chapter for Wholesome Foods for 2014 and 2015. Question 2 Prepare a cash flow statement for the firm for 2014 and 2015. Question 3 Interpret your findings, both for the firm's financial ratios compared to those of the peer group and for the cash flow statement. 2013 2014 2015 $ 20,200 $ 21,000 42,000 25,000 33,000 46,000 51,000 84,000 96,000 1,100 2,000 1,200 $115,200 650,000 $ 138,300 $ 169,000 740,000 664,000 (364,000) (394,000) $ 270,000 $ 286,000 $401,200 $ 408,300 2013 2014 $ 57,000 9,000 9,000 $ 48,000 9,500 11,500 $ 69,000 160,000 $ 22,200 150,000 $ 75,000 150,000 $ 22,200 161,100 $172,200 $183,300 $ 401,200 $408,300 2014 $ 600,000 (460,000) $ 140,000 $ 30,000 30,000 $ 60,000 Chapter 10 Understanding a Firm's Financial Statements (434,000) $ 306,000 $ 475,000 2015 $ 52,400 12,000 20,000 $ 84,400 185,000 $ 34,500 171,100 $ 205,600 $ 475,000 2015 $ 650,000 (487,500) $ 162,500 $ 37,500 40,000 $ 77,500 293 ofitable, but Abrahams has been disap- of cash flows. She had hoped to have about ailable for personal living expenses. However, there never seems to be much cash available for purposes other than business needs. Abrahams has asked you to examine the financial statements and explain why, although they show prof- its, she does not have any discretionary cash for personal needs. She observed, "I thought that I could take the profits and add back depreciation to find out how much cash I was generating. However, that doesn't seem to be the case. What's happening?" Question 1 Given the information provided by the financial statements, what would you tell Abrahams? (As part of your answer, calculate the firm's cash flows.) Question 2 How would you describe the cash flow pattern for the Maitz Company? Assets Cash Accounts receivable Inventory Prepaid rent Total current assets Gross property, plant, and equipment. Accumulated depreciation Net property, plant, and equipment TOTAL ASSETS Debt (Liabilities) and Equity Accounts payable Accrued expenses Short-term notes Total current liabilities Long-term debt Common stock Retained earnings Total owners' equity TOTAL DEBT AND EQUITY Income Statement Sales Cost of goods sold Gross profits Operating expenses: General and administrative expenses Depreciation expense Total operating expenses Situation 3 Philip Spencer, the owner of Wholesome Foods, has hired you to evaluate his firm's financial performance. The firm's financial data is provided below, along with an average for the financial ratios that Spencer collected on several competing peer firms. Question 1 Compute the financial ratios discussed in the chapter for Wholesome Foods for 2014 and 2015. Question 2 Prepare a cash flow statement for the firm for 2014 and 2015. Question 3 Interpret your findings, both for the firm's financial ratios compared to those of the peer group and for the cash flow statement. 2013 2014 2015 $ 20,200 $ 21,000 42,000 25,000 33,000 46,000 51,000 84,000 96,000 1,100 2,000 1,200 $115,200 650,000 $ 138,300 $ 169,000 740,000 664,000 (364,000) (394,000) $ 270,000 $ 286,000 $401,200 $ 408,300 2013 2014 $ 57,000 9,000 9,000 $ 48,000 9,500 11,500 $ 69,000 160,000 $ 22,200 150,000 $ 75,000 150,000 $ 22,200 161,100 $172,200 $183,300 $ 401,200 $408,300 2014 $ 600,000 (460,000) $ 140,000 $ 30,000 30,000 $ 60,000 Chapter 10 Understanding a Firm's Financial Statements (434,000) $ 306,000 $ 475,000 2015 $ 52,400 12,000 20,000 $ 84,400 185,000 $ 34,500 171,100 $ 205,600 $ 475,000 2015 $ 650,000 (487,500) $ 162,500 $ 37,500 40,000 $ 77,500 293

Answer rating: 100% (QA)

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