A B C E F G H DATA 7 Knapp Inc. Balance Sheet: 8 Assets 2017 2018 Cash $200 $150 10 Accounts receivable 450 425 Inventory 550 625 12 Current assets $1,200 $1,200 13 Plant and equipment $2,200 $2,600 Accumulated depreciation 1,000 1,200 Net plant and equipment $1,200 $1,400 16 Total assets $2.400 $2.600 17 Liabilities and Owners' Equity 18 Accounts payable $200 $150 19 Notes payable-current (9%) 0 150 20 Current liabilities $200 $300 21 Bonds $600 $600 22 Owners' equity 23 Common stock $900 $900 24 Retained earnings 700 300 25 Total owners' equity $1.60 $1,700 26 Total liabilities and owners' equity $2,400 $2,600 27 28 Knapp Inc. Income Statement: 29 2017 2018 30 Sales $1,200 $1,450 Cost of goods sold 700 850 32 Gross profit $500 $600 33 Selling, general, and administrative expen: $30 $40 34 Depreciation 220 250 200 240 35 Operating income $250 $360 36 Interest expense 50 64 37 Net income before taxes $200 $296 38 Taxes (40%) 80 118 39 Net income before taxes $120 $178 40 41 SOLUTION 42 a. How much is the firm's net working capital and what is the debt ratio? 43 2017 2018 44 Net working capital 45 Debt ratio 46 b. Complete a common-sized income statement, a common-sized balance sheet, and a statement of cash flows Knapp Inc. Common-sized Income Statement for 2018: Sales 50 Cost of goods sold 51 Gross profit 52 Operating expenses 53 Depreciation expense 54 Operating income Interest expense 3-15 +A C D E F G H 49 50 Cost of goods sold 51 Gross profit 52 Operating expenses Depreciation expense 54 Operating income Interest expense 56 Net income before taxes Taxes (40%) Net income 59 Knapp Inc. Common-sized Balance Sheet for 2018: 61 Assets 62 Cash 63 Accounts Receivable Inventory 65 Current assets 66 Plant and equipment 67 Accumulated depreciation 68 Net plant and equipment 69 Total assets 70 Liabilities and Equity 71 Accounts payable 72 Notes payable-current (9%) 73 Current liabilities 74 Bonds 5 Owners' equity 76 Common stock 77 Retained earnings 78 Total owners' equity 79 Total liabilities and owners' equity 80 81 Knapp Inc. Statement of Cash Flows for 2018: 82 Cash Flow from Operating Activities 83 Net Income 84 Depreciation expense 35 Decrease in accounts receivable 36 Increase in inventory 37 Decrease in account payable Net cash provided by operating activities 39 Cash Flow from Investing Activities 90 Increase in plant and equipment 91 Cash Flow from Financing Activities 92 Increase in notes payable 93 Dividends 94 Net cash provided by financing activities 95 Net decrease in cash 96 Beginning cash, January 1, 2018 97 Ending cash, December 31, 2018 3-15 (+