After investigating the different forms of business organization, Natalie Koebel decides to operate her business as a
Question:
While at a trade show, Natalie is introduced to Gerry Richards, operations manager of “Biscuits,” a national food retailer. After much discussion, Gerry asks Natalie to consider being Biscuits’ major supplier of oatmeal chocolate chip cookies. He provides Natalie with the most recent copy of the financial statements of Biscuits. He expects that Natalie will need to supply Biscuits’ Watertown warehouse with approximately 1,500 dozen cookies a week. Natalie is to send Biscuits a monthly invoice, and she will be paid approximately 30 days from the date the invoice is received in Biscuits’ Chicago office.
Natalie is thrilled with the offer. However, she has recently read in the newspaper that Biscuits has a reputation for selling cookies and donuts with high amounts of sugar and fat, and as a result, consumer demand for the company’s products has decreased. Instructions
Natalie has several questions. Answer the following questions for Natalie.
(a) What type of information does each financial statement provide?
(b) What financial statements would Natalie need in order to evaluate whether Biscuits will have enough cash to meet its current liabilities? Explain what to look for.
(c) What financial statements would Natalie need in order to evaluate whether Biscuits will be able to survive over a long period of time? Explain what to look for.
(d) What financial statement would Natalie need in order to evaluate Biscuits’ profitability? Explain what to look for.
(e) Where can Natalie find out whether Biscuits has outstanding debt? How can Natalie determine whether Biscuits would be able to meet its interest and debt payments on any debts it has?
(f) How could Natalie determine whether Biscuits pays a dividend?
(g) In deciding whether to go ahead with this opportunity, are there other areas of concern that Natalie should be aware of?
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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a The balance sheet reports the assets liabilities and stockholders equity of a company at a specific date The income statement presents the revenues ...View the full answer
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Related Book For 
Financial Accounting Tools for business decision making
ISBN: 978-0470534779
6th Edition
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
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