2. Balance sheet

2. Balance sheet The balance sheet provides a snapshot of the financial condition of a company. Investors and analysts use the information given on the balance sheet and other financial statements to make several interpretations regarding the company's financial condition and performance. Cute Camel Woodcraft Company is a hypothetical company. Suppose it has the following balance sheet items reported at the end of its first year of operation. For the second year, some parts are still incomplete. Use the information given to complete the balance sheet. Cute Camel Woodcraft Company Balance Sheet for Year Ending December 31 (Millions of Dollars) Year 2 Year 1 Year 2 Year 1 Assets Liabilities and equity Current assets: Current liabilities: Cash and equivalents $8,072 $6,457 Accounts payable $0 $0 Accounts receivable 2,953 2,363 Accruals 410 0 Inventories 8,662 6,930 Notes payable 2,324 2,187 Total current assets $19,687 $15,750 Total current liabilities $2,734 $2,187 Net fixed assets: Long-term debt 8,203 6,563 Net plant and equipment $24,063 $19,250 Total debt $10,937 $8,750 Common equity: Common stock 21,328 17,063 9,187 Retained earnings 11,485 $32,813 $26,250 Total common equity Total liabilities and equity Total assets $43,750 $35,000 $43,750 $35,000 Statement #1: Cute Camel's pool of relatively liquid assets, which are available to support the company's current and future sales, decreased from Year 1 to Year 2. This statement is because: Cute Camel's total current liabilities balance decreased by $3,937 million between Year 1 and Year 2 Cute Camel's total current asset balance actually increased from $15,750 million to $19,687 million between Year 1 and Year 2 Cute Camel's total current liabilities balance increased from $2,363 million to $2,953 million between Year 1 and Year 2 Statement #2: In Year 2, Cute Camel Woodcraft Company was profitable. This statement is because: The cash and equivalents account increased between Years 1 and 2 Cute Camel's retained earnings account increased between the end of Years 1 and 2 Cute Camel's total assets increased between Years 1 and Statement #3: If Cute Camel ever goes bankrupt, its common stockholders will be paid off first, then its debtholders and preferred stockholders. This statement is because: Debtholders are treated as residual investors Common shareholders are treated as residual investors Debtholders and preferred shareholders are considered residual investors Based on your understanding of the different items reported on the balance sheet and the information they provide, if everything else remains the same, then the cash and equivalents item on the current balance sheet is likely to if the firm issues $3 million of new common stock