Your friend, Abu, has come to you for some assistance in evaluating a company he is...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Your friend, Abu, has come to you for some assistance in evaluating a company he is considering investing in. Abu has provided you with the income statement, balance sheet and statement of cash flows for the year ended December 31, 2021 as well as some industry standards for select ratios. Abu knows you have taken a financial accounting course & is hoping you can help him decide whether or not he should invest in the company. Required: 1. Calculate 12 ratios to help you analyze the company. 2. Review the Statement of Cash Flows for Genie's Carpets and describe 3 strengths or weaknesses. 3. Based on your answers from Part 1 and 2 would you recommend Abu invests in the company. You must discuss at least 4 ratios in providing your answer. Gross profit margin ratio Net profit margin ratio Rate of return on assets Earnings per Share Current ratio Dividend Yield SHOW YOUR WORK Industry averages-2021 $ 55.00% 7.00% 3% 10.00 1.60 0.11:1 4 GENIE'S CARPETS LIMITED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2021 Sales Cost of goods sold Selling expenses Administrative expenses Rent expense Depreciation Income from operations Interest expense Income before tax Income tax expense Net income $ 2021 1,385,400 595,722 789,678 659,900 313,500 251,800 319,800 228,600 19,200 7,400 129,778 5,250 124,528 18,680 2020 $ 105,848 $ $1,115,250 501,860 613,390 18,600 5,400 504,400 108,990 1,050 107,940 10,520 97,420 Cash Accounts receivable Inventory Building Accumulated depreciation Land Accounts payable Income taxes payable Wages payable Note payable Shareholder's Equity Common shares Retained Earnings GENIE'S CARPETS LIMITED BALANCE SHEET DECEMBER 31, 2021 ASSETS 2021 $177,798 118,750 101,800 398,348 55,000 15,500 75,000 114,500 LIABILITIES AND SHAREHOLDER'S EQUITY $195,700 18,680 6,050 220,430 105,000 325,430 $512,848 $325,390 10,000 177,418 187,418 2020 $512,848 $122,190 81,500 99,800 303,490 30,000 8,100 21,900 $182,500 10,520 4,800 197,820 21,000 218,820 10,000 96,570 106,570 $325,390 4 Cash flow from operating activities Net income Add depreciation Adjustment to reconcile net income to net cash provided by operating activities Net increase in current assets other than cash, Net increase in current liabilities GENIE'S CARPETS LIMITED STATEMENT OF CASH FLOWS YEAR ENDING DECEMBER 31, 2021 Cash flow from Financing activities Payment of dividends New loan proceeds Repayment of loans Cash flow from investing activities Purchase of land and building Net cash inflow Beginning cash Ending cash Additional information: 5 Selected data from the December 31, 2019 financial statements: Accounts receivable Inventory Accounts payable Total assets Shareholder equity Market price per share December 31, 2021 Market price per share December 31, 2020 Number of shares outstanding No preferred shares 5 5 $ $ 5 $ $ $ 2021 105,848 $ 7,400 39,250- 22,610 96,608 25,000- 89,000 5,000- 59,000 - 100,000 55,608 122,190 77,600 89,760 157,800 219.130 19,150 2020 20.00 15.00 10,000 97,420 5,400 13,940 32,840 121,720 20,000 4,000 24,000 177.798 5 122,190 97,720 24,470 Your friend, Abu, has come to you for some assistance in evaluating a company he is considering investing in. Abu has provided you with the income statement, balance sheet and statement of cash flows for the year ended December 31, 2021 as well as some industry standards for select ratios. Abu knows you have taken a financial accounting course & is hoping you can help him decide whether or not he should invest in the company. Required: 1. Calculate 12 ratios to help you analyze the company. 2. Review the Statement of Cash Flows for Genie's Carpets and describe 3 strengths or weaknesses. 3. Based on your answers from Part 1 and 2 would you recommend Abu invests in the company. You must discuss at least 4 ratios in providing your answer. Gross profit margin ratio Net profit margin ratio Rate of return on assets Earnings per Share Current ratio Dividend Yield SHOW YOUR WORK Industry averages-2021 $ 55.00% 7.00% 3% 10.00 1.60 0.11:1 4 GENIE'S CARPETS LIMITED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2021 Sales Cost of goods sold Selling expenses Administrative expenses Rent expense Depreciation Income from operations Interest expense Income before tax Income tax expense Net income $ 2021 1,385,400 595,722 789,678 659,900 313,500 251,800 319,800 228,600 19,200 7,400 129,778 5,250 124,528 18,680 2020 $ 105,848 $ $1,115,250 501,860 613,390 18,600 5,400 504,400 108,990 1,050 107,940 10,520 97,420 Cash Accounts receivable Inventory Building Accumulated depreciation Land Accounts payable Income taxes payable Wages payable Note payable Shareholder's Equity Common shares Retained Earnings GENIE'S CARPETS LIMITED BALANCE SHEET DECEMBER 31, 2021 ASSETS 2021 $177,798 118,750 101,800 398,348 55,000 15,500 75,000 114,500 LIABILITIES AND SHAREHOLDER'S EQUITY $195,700 18,680 6,050 220,430 105,000 325,430 $512,848 $325,390 10,000 177,418 187,418 2020 $512,848 $122,190 81,500 99,800 303,490 30,000 8,100 21,900 $182,500 10,520 4,800 197,820 21,000 218,820 10,000 96,570 106,570 $325,390 4 Cash flow from operating activities Net income Add depreciation Adjustment to reconcile net income to net cash provided by operating activities Net increase in current assets other than cash, Net increase in current liabilities GENIE'S CARPETS LIMITED STATEMENT OF CASH FLOWS YEAR ENDING DECEMBER 31, 2021 Cash flow from Financing activities Payment of dividends New loan proceeds Repayment of loans Cash flow from investing activities Purchase of land and building Net cash inflow Beginning cash Ending cash Additional information: 5 Selected data from the December 31, 2019 financial statements: Accounts receivable Inventory Accounts payable Total assets Shareholder equity Market price per share December 31, 2021 Market price per share December 31, 2020 Number of shares outstanding No preferred shares 5 5 $ $ 5 $ $ $ 2021 105,848 $ 7,400 39,250- 22,610 96,608 25,000- 89,000 5,000- 59,000 - 100,000 55,608 122,190 77,600 89,760 157,800 219.130 19,150 2020 20.00 15.00 10,000 97,420 5,400 13,940 32,840 121,720 20,000 4,000 24,000 177.798 5 122,190 97,720 24,470
Expert Answer:
Answer rating: 100% (QA)
Answer PART 1 SNO RATIO FORMULA INDUSRTY STANDARD PATICULARS 2021 PATICULARS 2020 REMARKS 1 CURRENT RATIO CURRENTS ASSETSCURRENT LIABILITIES 16 398348220430 18 303490197820 153 CURRENT RATIO IS RATIO ... View the full answer
Related Book For
Introduction To Federal Income Taxation In Canada
ISBN: 9781554965021
33rd Edition
Authors: Robert E. Beam, Stanley N. Laiken, James J. Barnett
Posted Date:
Students also viewed these accounting questions
-
The statement of cash flows for the year ended December 31, 2013, for Bronco Metals is presented below. Required: Prepare the statement of cash flows assuming that Bronco prepares its financial...
-
Your client, Ashley, has come to you for some advice on computing her net income from property. (a) In February, Ashley sold all her investments and paid off her personal residence mortgage. On March...
-
The statement of cash flows for the year ended December 31, 2014, and other data for Bradley Corporation are shown below: Additional data: a. Bradleys Dividends receivable account decreased by $2,000...
-
Q5] A firm has reported a profit of Rs.1,47,000 for the year ended 31-3-2014 after taking into consideration the following items. (i) The cost of an asset Rs.23,000 has been taken as an expense (ii)...
-
Consider the December transactions for Shine King Cleaning that were presented in Chapter 5. (Cost data have been removed from the sale transactions.) Shine King uses the perpetual inventory system....
-
Why is NOPAT a better performance measure than net income?
-
Follow the steps below to prove the LLN without using CLT. (a) Let \(X\) be a random variable with mean \(\mu\) and variance \(\sigma^{2}\). Then for any real number \(\alpha>0,...
-
Picasso Restoration Company completed the following selected transactions during May 2014: May 1. Established a petty cash fund of $800. 10. The cash sales for the day, according to the cash register...
-
Using the list method or the switch method, find the inverse function of: f(x)=6x+1-13 f1(x) =
-
Activity-Based Product Costing Davis Company produces two hair dryers: regular and deluxe. The company has four activities: machining, engineering, receiving, and inspection. Information on these...
-
2. A block of mass m on a horizontal surface is attached to the end of a massless spring with stiffness constant k. The other end of the spring is fixed. The mass is given an initial displacement xo...
-
Growth Plan for kebab burger food truck for marketing management course. o How will you expand in the future? (you are starting with 1 truck) o How will you deal with growth? Contingency Plan o What...
-
Calculate the tracking error for the manager relative to the index. How successful was the manager in limiting his or her clients unsystematic risk exposure? Explain. Period Manager A (%) Index (%) 1...
-
Sociocultural analysis for timing and registration management services to sporting events in india. i want 5 to 6 points only.
-
Can you help me fix these bugs in my PlayerTest.java class so it compiles?: (I commented HELP next to errors in code) I think that when I created an object it has the wrong parameters. it uses file...
-
Grim Company reported pretax financial statement income of P200,000 and taxable income of P150,000. The difference is due to the following: Interest in municipal bonds Premium on municipal bonds...
-
Sofea has a job as a manager in a bakery in Shah Alam earning RM30,000 a year. She is considering to take another job as a manager of another bakery in Klang for a salary of RM40,000 a year or to...
-
Suppose the government bond described in problem 1 above is held for five years and then the savings institution acquiring the bond decides to sell it at a price of $940. Can you figure out the...
-
Chow Installation and Repair Ltd. ("Chow") is in the business of installing and repairing overhead doors. Chow maintained a list of qualified installers and repair-persons and would contact them as...
-
For each of the following corporations, determine and explain the type of residency, for tax purposes for 2012. (a) ABI, incorporated in Montreal, Quebec, in 1980, carries on a clothing manufacturing...
-
Ms. Sui is an executive of a large public retail corporation, Clothes to You Ltd., situated in Dundas, Ontario. Ms. Sui is not married. However, she has two adopted children, ages 8 and 10, who...
-
Which of the following is not an inherent part of Statement on Auditing Standards, No. 99/113? 1. Greater scrutiny of the chief executive and chief financial officers personal financial condition 2....
-
Which of the following statements best describes corporate governance with respect to fraud? 1. Auditors are primarily responsible for the detection of fraud, the Board of Directors for the...
-
Which of the following is not a reason that the prevention and detection of fraud resulting from management override and collusion presents a significant challenge for the antifraud community? 1....
Study smarter with the SolutionInn App