Complete the following problems:

• Problem 3-1: Working with a Balance Sheet
• Problem 3-2: Computing Cash Flows
• Problem 3-3: Working with the Statement of Cash Flows
• Problem 3-4: Ratio Analysis
• Problem 3-5: Market-Value Ratios
• Problem 3-6: Computing Ratios

You can access the problem details by clicking on Understanding Financial Statements and Cash Flow (Attached).

Complete the problems in an Excel spreadsheet or Word document. Be sure to show your work.

Module 3 Critical Thinking Assignment Understanding Financial Statements and Cash Flow (100 Points) Complete the following problems. You will likely use a spreadsheet for this assignment but you may choose to type up your answers in a Word document. In either case, be sure to show your work. Problem 3-1: Working with a Balance Sheet Prepare a balance sheet from the following information. What is the net working capital and debt ratio? DATA Cash Account receivables Accounts payable Short-term notes payable Inventories Gross fixed assets Other current assets Accumulated depreciation Long-term debt Common stock Other assets Retained earnings Solution Balance Sheet: Cash Accounts receivable Inventories Other current assets Total current assets Gross Buildings and equipment Accumulated Depreciation Net fixed assets Other assets Total assets Notes payable 75,000 64,050 34,500 15,750 60,000 1,920,000 7,500 468,000 300,000 735,000 22,500 ? Accounts payable Total current liabilities Long-term debt Total Liabilities Common Stock Retained earnings Total equity Total liabilities and equity Net Working Capital = Debt Ratio = Problem 3-2: Computing Cash Flows Given the following information, prepare a statement of cash flows. DATA Increase in accounts receivable Increase in inventories Operating Income Interest Expense Increase in accounts payable Dividends Increase in common stock Increase in net fixed assets Depreciation Expense Income taxes Beginning cash Solution Cash Flows from Operating Activities 75 90 225 75 75 45 60 69 36 51 60 *Net Income Adjustments: Depreciation Increase in accounts receivable Increase in inventories Increase in account payable Net Cash provided by operating activities Cash Flows from Investing Activities **Increase in gross fixed assets Cash Flows from Financing Activities Increase in common stock Dividends Net cash provided by financing activities Decrease in Cash Beginning Cash Ending cash *Net Income = Operating Income - Interest Expense - Income taxes **The change in gross fixed assets is equal to the change in net fixed assets plus the depreciation expense for the year of, resulting in a change in gross fixed assets. Problem 3-3: Working with the Statement of Cash Flows Prepare a statement of cash flows from the following scrambled list of items. DATA Increase in inventories Operating income Dividends Increase in accounts payables Interest expense Increase in common stock Depreciation expense 17,500 547,500 72,500 107,500 112,500 12,500 42,500 Increase in accounts receivable Increase in long-term debt Increase in short-term notes payable Increase in gross fixed assets Increase in paid in capital Income taxes Beginning cash 172,500 132,500 37,500 135,000 50,000 112,500 625,000 Solution Cash Flows from Operating Activities Net Income Adjustments: Depreciation Increase in accounts receivable Increase in inventories Increase in account payable Net Cash provided by operating activities Cash Flows from Investing Activities Increase in plant and equipment Cash Flows from Financing Activities Increase in notes payable Increase in long-term debt Issued new common stock Dividends Net cash provided by financing activities Net Decrease in cash Beginning cash Ending cash Problem 3-4: Ratio Analysis The Balance Sheet and Income Statement for Saudi Manufacturing Corporation are as follows: DATA Balance Sheet: Cash Acct/Rec Inventories Current assets Net fixed assets Total assets 22,500 90,000 45,000 157,500 202,500 360,000 Accts/Pay Accrued expenses Short-term N/P Current liabilities Long-term debt Owner's equity Total liabilities and owners' equity 49,500 27,000 13,500 90,000 90,000 180,000 360,000 Income Statement: Net sales COGS Gross profit Operating expenses Net operating income Interest expense EBT Income taxes Net income 360,000 148,500 211,500 135,000 76,500 16,515 59,985 23,985 36,000 Solution Calculate the following ratios: Current ratio = Debt ratio = Times interest earned = Average collection period = Inventory turnover = Fixed asset turnover = Total asset turnover = Operating profit margin = Operating return on assets = Return on equity = Problem 3-5: Market-Value Ratios Jeddah Industries has a price earnings ratio of 18.69X. a. If Jeddah's earnings per share are SAR 2.65, what is the price per share of Jeddah's stock? b. Using the price per share you calculated in part a, determine the price / book ratio if Jeddah's equitybook value is SAR 12.67. DATA Price/earnings ratio Earnings per share (SAR) Equity book value (SAR) 18.69X 2.65 12.67 Solution a. Price per share b. Price/book ratio Problem 3-6: Computing Ratios Use the information from the balance sheet and income statement below to calculate the ratios listed below: DATA ASSETS Cash Accounts receivable Inventory Prepaid expenses Total current assets Gross plant and equipment Accumulated depreciation Net plant and equipment Total assets DEBT AND EQUITY 250,000 75,000 125,000 25,000 475,000 1,002,500 -165,000 837,500 1,312,500 Accounts payable Accrued liabilities Total current debt Long-term debt Common stock Retained earnings Total debt and equity Sales Cost of goods sold Gross profit Selling, general, and administrative expenses Depreciation expense Operating income Interest expense Earnings before taxes Taxes Earnings available to common shareholders Solution RATIOS Current ratio Acid-test ratio Times interest earned Inventory turnover Total asset turnover Operating profit margin Days in receivables Operating return on assets Debt ratio Fixed asset turnover Return on equity 225,000 157,500 382,500 300,000 512,500 117,500 1,312,500 525,000 -225,000 300,000 -72,500 -65,000 162,500 -20,000 142,500 -40,000 102,500