Question
A) You are provided with the balance sheet and income statement of the Neuman Corporation: Construct a cash flow statement for the year ended Dec
| A) | You are provided with the balance sheet and income statement of the Neuman Corporation: | |||||
| Construct a cash flow statement for the year ended Dec 31, 2008. Note that this company has also paid dividends on the common stock, but you need to | ||||||
| find out how much by yourself. Hint: take a look at retained earnings. The company had no preferred stock (50% of exam grade) | ||||||
| BALANCE SHEET | ||
| ASSETS | 2007 | 2008 |
| Cash | 45,000 | 50,000 |
| Marketable Securities | 275,000 | 160,000 |
| Accounts Receivable | 240,000 | 220,000 |
| Inventories | 230,000 | 275,000 |
| Investments in other companies (long-term, obviously J) | 70,000 | 65,000 |
| Plant & Equipment | 1,400,000 | 1,550,000 |
| Accumulated depreciation | -450,000 | -600,000 |
| Net Plant & Equipment | 950,000 | 950,000 |
| Total Assets | 1,810,000 | 1,720,000 |
| LIABILITIES AND STOCKHOLDERS EQUITY | ||
| Accounts Payable | 310,000 | 85,000 |
| Notes Payable (due next month) | 65,000 | 10,000 |
| Accrued Expenses | 30,000 | 5,000 |
| Income tax payable | 5,000 | 10,000 |
| Bonds payable (due in 2020) | 800,000 | 900,000 |
| Common stock (100,000 shares in 2007, 1$ par) | 100,000 | 105,000 |
| Capital paid-in in excess of par | 100,000 | 105,000 |
| Retained earnings | 400,000 | 500,000 |
| Total L+SE | 1,810,000 | 1,720,000 |
| INCOME STATEMENT | ||
| Sales | 5,500,000 | |
| Less: Cost of Goods Sold | 4,300,000 | |
| Gross profit | 1,200,000 | |
| Less: Selling and Administrative Expenses | 230,000 | |
| Less: Depreciation expense | 150,000 | |
| Earnings Before Interest and Taxes | 820,000 | |
| Less: Interest expense | 70,000 | |
| Earnings Before Taxes | 750,000 | |
| Less: Taxes (at 50%) | 375,000 | |
| Net Income | 375,000 | |
| Calculate the requested ratio below for the company for the 2008, make sure you write down the formula | ||
| Current ratio | ||
| The industry average is written below. Is Neuman doing better or worse than the industry? You need to write only one word | ||
| 0.7 times | ||
| What does this ratio show? How is it interpreted? | ||
| Calculate the requested ratio below for the company for the 2008, make sure you write down the formula | ||
| Times Interest Earned Ratio | ||
| The industry average is written below. Is Neuman doing better or worse than the industry? You need to write only one word | ||
| 6 times | ||
| What does this ratio show? How is it interpreted? | ||
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Auditing A Risk Analysis Approach
Authors: Larry F. Konrath
5th Edition
032405789X, 9780324057898
