1a. Use the following balance sheet and profit and loss statement for Associated Industries to pull the data and answer the questions below the financial statements: Associated Industries Balance Sheet Change 2016 2017 Assets Current Assets Cash Inventory Accounts Receivable Total Current Assets Plant, Property and Equipment Less: Accumulated Depreciation $40,500 $12,652 $54,000 $111,500 $132,750 $151,750 $227,250 $275,902 $45,000 $45,000 ($2,250) ($4,500) Total Plant, Property and Equipment $42,750 $40,500 Total Assets Liabilities and Owners' Equity $270,000 $316,402 Liabilities Current Liabilities Accounts Payable $40,500 $77,580 Total Current Liabilities $40,500 $77,580 Long-Term Liabilities Bank Loan Payable $135,000 $135,000 Total Long-Term Liabilities $135,000 $135,000 Total Liabilities $175,500 $212,580 Owners' Equity Owners' Investment $90,000 $90,000 Retained Earnings Total Owners' Equity Total Liabilities and Owners' Equity $4,500 $13,822 $94,500 $103,822 $270,000 $316,402 Associated Industries Profit and Loss Statement 2016 2017 Sales Activities Revenue $375,000 $386,250 Cost of Goods Sold $211,056 $217,388 Gross Profit $163,944$168,862 Operating Expenses Selling Expenses Advertising $15,000 $20,000 Sales Staff Salary $75,000 $77,250 General and Administrative Rent $22,500 $22,500 Utilities $11,250 $11,588 Owners' Salary $15,750 $15,750 Accounting, Payroll and Legal $7,500 $7,725 Depreciation $2,250 $2,250 Operating Profit $14,694 $11,800 $0 $0 Interest Profit Before Taxes Income Taxes Net Profit $14,694 $11,800 $3,086 $2,478 $11,608 $9,322 Associated Industries Profit and Loss Statement 2016 2017 Sales Activities Revenue $375,000 $386,250 Cost of Goods Sold $211,056 $217,388 Gross Profit $163,944 $168,862 Operating Expenses Selling Expenses Advertising $15,000 $20,000 Sales Staff Salary $75,000 $77,250 General and Administrative Rent $22,500 $22,500 Utilities $11,250 $11,588 Owners' Salary $15,750 $15,750 Accounting, Payroll and Legal $7,500 $7,725 Depreciation $2,250 $2,250 Operating Profit $14,694 $11,800 Interest $0 $0 Profit Before Taxes $14,694 $11,800 Income Taxes Net Profit $3,086 $2,478 $11,608 $9,322 1b. Create an Indirect Cash flow statement in the table below. Associated Industries Cash Flow Statement (indirect method) Beginning cash Net profit Add depreciation Accts receivable (increase)/Decrease Inventory (increase)/Decrease Accounts payable increase/(decrease) Operating Cash flow Asset activity cash flow Financing activity cash flow Owners' withdrawal Bank principal payment Total Financing activity cash flow Ending Cash 2. Explain, what has happened to the overall cash balance in the past year? (Did it Increase or decrease and by how much?) Answer: 3. What is the major contributors of cash for the year and what does that mean for the operation of the business? Answer: 4. What are the two major reductions for cash and what does that suggest for the operations of the business? Answer: Complete a margin analysis for Associated Industries and answer the questions below. Associated Industries Year Ending Year Ending Change 2016 2017 Gross Margin 43.7% 43.7% 0% Operating Margin 3.9% 3.0% (9%) Net Margin 3.0% 2.4% (6%) 5. What was the change to the Gross Margins for the period and what does that indicate for the operation of the business? Answer: 6. What was the change to the Operating Margin and what does that indicate for the operation of the business? Answer: 7. What was the change to the Net Margin and what does that indicate for the operation of the business