Comparative financial statements for Carla Vista and Flint Ltd. are shown below. CARLA VISTA AND FLINT LTD. Income Statement Year Ended December 31 2021 2020 Net sales $900,000 $840,000 Cost of goods sold 625.000 575,000 Gross profit 275,000 265,000 Operating expenses 154,000 150,000 Profit from operations 121,000 115,000 Other revenues and expenses Interest expense 30.000 20.000 Profit before income tax 91,000 95,000 Income tax expense 27,000 20,000 Profit $64,000 $75,000 CARLA VISTA AND FLINT LTD. Balance Sheet December 31 Assets 2021 2020 2019 Cash $94.000 $84.000 $10,000 Accounts receivable 112,000 112.000 110,000 Inventories 140,000 135,000 96,000 Prepaid expenses 25,000 23,000 114,000 Land, buildings, and equipment 390,000 305,000 300,000 Total assets $761,000 $659,000 $630,000 Liabilities and Shareholders' Equity Liabilities Notes payable $110,000 $100,000 $100,000 Accounts payable 43,000 40,000 50,000 Accrued liabilities 32.000 40,000 30,000 Bonds payable, due 2024 190,000 150,000 181,000 Bonds payable, due 2024 190,000 150,000 181,000 Total liabilities 375,000 330,000 361,000 Shareholders' equity Common shares (20,000 issued) 200,000 200,000 200,000 Retained earnings 186,000 129,000 69,000 Total shareholders' equity 386,000 329,000 269,000 Total liabilities and shareholders' equity $761,000 $659,000 $630,000 Additional information: 1. 2. Seventy-five percent of the sales were on account. The allowance for doubtful accounts was $3,000 in 2021, $5,000 in 2020, and $2,500 in 2019. In 2021 and 2020, dividends of $3,000 and $9,000, respectively, were paid to the common shareholders. Cash provided by operating activities was $103,500 in 2021 and $129,000 in 2020. 3. 4. 5. Cash used by investing activities was $115,500 in 2021 and $32,000 in 2020. Calculate all possible liquidity, solvency, and profitability ratios for 2021 and 2020. (Round answers for Collection period, Days sales in inventory, Operating cycle and Free cash flow to decimal places, eg. 125. Round answer for Earnings per share to 2 decimal places, es. 12.50. Round all other answers to 1 decimal place, eg. 12.5 or 12.5%. Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45)) 2021 2020 Liquidity Ratios 1. Current ratio 201 :1 1.97 :1 2. Acid-test ratio 1.11 1.09 :1 3. Receivables turnover 6.03 times 5.68 times 4. Collection period 60 days 63 days 5. Inventory turnover 6.55 times 7.27 times 6. Days sales in inventory 55 days 50 days 7. Operating cycle 115 days 113 days Solvency Ratios 8. Debt to total assets 25.0 % 228 94 9. Interest coverage 4.03 times 5.75 times 10. Free cash flow $ 64000 75000 Profitability Ratios 11 Gross profit margin 30.6 % 31.5 %6 12 Profit margin 7.1 % 8.9 % 96 13 Asset turnover 1.18 times 1.27 times 14. Return on assets 8.4 % 11.4 %6 15. Return on equity 16.6 % 22.8 % 16. Earnings per share $ 320000 $ 375000 17. Payout ratio 47 % 12.0 % e Textbook and Media Identify whether the change in each ratio from 2020 to 2021 calculated in (a) was favourable, unfavourable, or no change. Change Liquidity Ratios 1. Current ratio 2. Acid-test ratio 3 Receivables turnover -> 4. Collection period > 5 5. Inventory turnover 5. Inventory turnover > 6. Days sales in inventory 7. Operating cycle Solvency Ratios 8 Debt to total assets 9. Interest coverage 10. Free cash flow > Profitability Ratios 11. Gross profit margin 12. Profit margin 13 Asset turnover 14. Return on assets 15. Return on equity 16. Earnings per share 17. Payout ratio > e Textbook and Media Identify whether overall (1) liquidity. (2) solvency and (3) profitability improved, deteriorated, or remained the same between 2020 and 2021 (1) Liquidity (2) Solvency (3) Profitability
