Case 11.22 Capstone analytical review of Chapters 9- 11. Calculate selected financial ratios and explain financial reporting issues (Note: Please refer to Case 4.32 on pages 135-136 for the financial statement data needed for the analysis of this case. You should also review the solution to Case 4.32, provided by your instructor, before attempting to complete this case.) Required: a. Case 4.32 presents the 2022 income statement and balance sheet for Gerrard Construction Co. What other financial statements are required? What information would these statements communicate that could not be determined by reviewing only the income statement and balance sheet? b. Briefly describe the note disclosures that should be provided by Gerrard Construction Co., and explain why note disclosures are considered an integral part of the financial statements. C. Assume that the balance of "Accounts Receivable, net" at December 31, 2021, was $24,600. Calculate the following activity measures for Gerrard Construction Co. for the year ended December 31, 2022: (1) Accounts receivable turnover. (2) Number of days' sales in accounts receivable. d. Calculate the following financial leverage measures for Gerrard Construction Co. at December 31, 2022: (1) Debt ratio. (2) Debt/equity ratio. e. Gerrard Construction Co. wishes to lease some new earthmoving equipment from Caterpillar on a long-term basis. What impact (increase, decrease, or no effect) would a capital lease of 12 million have on the company's debt ratio and debt/equity ratio? (Note: These items were computed in (d) and do not need to be recomputed for this requirement.) f. Review the answer to Case 4.32 part i at this time. Assume that Gerrard Construction Co. had 4,800,000 shares of $1 par value common stock outstanding throughout 2022, and that the market price per share of common stock at December 31, 2022, was $57.50. Calculate the following profitability measures for the year ended December 31, 2022: (1) Earnings per share of common stock. (2) Price/earnings ratio. (3) Dividend yield. (4) Dividend payout ratio.Case 4.32 LO 4-6, 2 4-7 Capstone analytical review of L Chapters 2-L 4. Calculate liquidity and profitability measures and explain various financial statement relationships for an excavation contractor Gerrard Construction Co. is an excavation contractor. The following summarized data (in thousands) are taken from the December 31, 2022, financial statements: For the Year Ended December 31, 2022: Net revenues $96,600 Cost of services provided 34,200 Depreciation expense 19.500 Operating income $42,900 Interest expense 11,400 Income tax expense 9.600 Net income $21,900 At December 31, 2022 Asset Cash and short-term investments $ 8,400 Accounts receivable, net 29,400 Property, plant, and equipment, net 232.200 Total assets $270,000 Liabilities and Stockholders' Equity Accounts payable $ 4,500 Income taxes payable 4.800 Notes payable (long term) 142,500 Paid-in capital 30,000 Retained earnings 88.200 Total liabilities and stockholders' equity $270,000 At December 31, 2021, total assets were $246,000 and total stockholders' equity was $97,800. There were no changes in notes Page 136 payable or paid-in capital during 2022. Required: The cost of services provided amount includes all operating expenses (selling, general, and administrative expenses) except depreciation expense. What do you suppose the primary reason was for management to separate depreciation from other operating expenses? From a conceptual point of view, should depreciation be considered a "cost" of providing services? b. Why do you suppose the amounts of depreciation expense and interest expense are so high for Gerrard Construction Co.? To which specific balance sheet accounts should a financial analyst relate these expenses? C. Calculate the company's average income tax rate. (Hint: You must first determine the earnings before taxes.) Explain why the amount of income tax expense is different from the amount of income taxes payable. e. Calculate the amount of total current assets. Why do you suppose this amount is so low, relative to total assets? Why doesn't the company have a Merchandise Inventory account? g- Calculate the amount of working capital and the current ratio at December 31, 2022. Assess the company's overall liquidity. h. Calculate ROI (including margin and turnover) and ROE for the year ended December 31, 2022. Assess the company's overall profitability. What additional information would you like to have to increase the validity of this assessment? 1 . Calculate the amount of dividends declared and paid during the year ended December 31, 2022. (Hint: Do a T-account analysis of retained earnings.)