Comprehensive Problem 2 - St of Cash Flows and Ratios Algo M. Schmidt Inc. M. Schmidt Inc. Income Statement Comparative Balance Sheets For years ended December 31, 2017 and 2018 December 31, 2018 and 2017 2018 2017 Change 2018 2017 Current assets: Sales (all on credit) $631,000 $599,000 Cash $76,300 $44,900 $31,400 Cost of goods sold (348,000) (285.000) Accounts receivable (net) 46,000 38,000 8,000 Gross margin 283,000 314,000 Inventory 50,000 48,000 2,000 Prepaid expenses 1,600 3,600 -2,000 Depreciation expense 38,000 53,000 Other current assets 2.290 3.500 -1,210 Other operating 135,000 112,000 Total current assets 176,190 138,000 38,190 expenses Total operating 173,000 165,000 expenses Operating income 110,000 149,000 Long-term Investments 89,000 62,000 27,000 314,000 263,000 51,000 (5,100) Plant assets Less: accumulated (3,800) depreciation 4,500 Total plant assets (80,400) Other income (expenses) Interest expense Gain on sale of investments Loss on sale of plant assets Total other income (expenses) (53,000) 27,400 6,400 233.600 210,000 23.600 (3.600) (4,300) Total assets 498.790 410,000 88.790 (15,100) (3,600) Income before income taxes Income taxes expense Net income 107,700 145,400 (32,310) (43,620) $75,390 $101,780 Current liabilities: Accounts payable Accrued liabilities Income taxes payable Total current liabilities $31,300 2,400 2.700 36,400 $32,000 $-700 2,000 400 10,000 -7,300 44,000 -7,600 256,000 292,400 190,000 66,000 234,000 58,400 M. Schmidt Inc. Long term liabilities: Statement of Retained Earnings Notes Payable For the year ended December 31, 2018 Total liabilities 2018 2017 Ret. earnings, Jan. 1 $38,000 $0 Stockholders' equity Add: net income 75,390 101,780 Common stock, $5 par value Deduct: Dividends (45,000). (63,780) Additional paid-in capital Increase in retained 30,390 38,000 Retained earnings earnings Ret. earnings, Dec. 31 $68,390 $38.000 Total stockholders' equity Total liabilities and stockholders' equity 110,000 28,000 68,390 206,390 $498,790 110,000 0 28,000 0 38,000 30,390 176,000 30,390 $410,000 $88,790 22.000 Other information: Shares of common stock outstanding Earnings per share Dividends per share Market price per share, common stock $3.43 $2.05 22,000 $4.63 $2.9 $13 $16 Cash Flows from Oper Horiz Analysis Horiz Analysis Vertic Analysis Vertic Analysis Inc St Bal St Inc St Bal Sheet Ratios Requirement Prepare the cash flows from operations section of M. Schmidt Inc.'s 2018 statement of cash flows using the indirect method. Enter items to be subtracted as negative values. M. Schmidt Inc. Cash Flows from Operating ActivitiesIndirect Method For Year Ended December 31, 2018 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided by operations: Add: Accounts receivable decrease Cash Flows from Oper Horiz Analysis Horiz Analysis Vertic Analysis Vertic Analysis Inc St Bal St Inc St Bal Sheet Ratios Requirement Prepare a vertical analysis on the partial income statements for 2017 and 2018. Enter decreases as negative amounts/percents. M. Schmidt Inc. PARTIAL INCOME STATEMENT (HORIZONTAL ANALYSIS) For the years ended December 31, 2017 and 2018 Increase/decrease 2018 2017 Amount Percent 599,000 0 599,000 Sales Cost of goods sold Gross margin Expenses Depreciation expense Other operating expenses Total operating expenses Operating income 0 112,000 112,000 487,000 0 $ Cash Flows Horiz Analysis Horiz Analysis Vertic Analysis Vertic Analysis from Oper Inc St Bal St Inc St Bal Sheet Ratios Requirement Prepare a vertical analysis on the partial balance sheets for 2017 and 2018. Enter decreases as negative amounts/percents. M. Schmidt Inc. Partial Balance Sheet (Horizontal Analysis) For the years ended December 31, 2018 and 2017 Increase/decrease Amount Percent 2018 2017 Current assets: Cash Accounts receivable (net) Inventory Prepaid expenses Other current assets Total current assets Long-term investments Plant assets Less: accumulated depreciation Total plant assets Total assets Cash Flows Horiz Analysis Horiz Analysis Vertic Analysis Vertic Analysis from Oper Inc St Bal St Inc St Bal Sheet Ratios Requirement Prepare a vertical analysis on the partial income statements for 2017 and 2018. M. Schmidt Inc. Partial Income Statement (Vertical analysis) For the years ended December 31, 2018 and 2017 2018 % 2017 % $ 599,000 0 599,000 Sales Cost of goods sold Gross margin Expenses Depreciation expense Other operating expenses Total operating expenses Operating income 0 112,000 112,000 487,000 $ 0 Cash Flows Horiz Analysis Horiz Analysis Vertic Analysis Vertic Analysis from Oper Inc St Bal St Inc St Bal Sheet Ratios Requirement Prepare a vertical analysis on the partial balance sheet for 2017 and 2018. M. Schmidt Inc. Partial Balance Sheet (Vertical analysis) For the years ended December 31, 2018 and 2017 2018 % 2017 % Liabilities Current liabilities: Accounts payable Accrued liabilities Income taxes payable Total current liabilities Notes payable Total liabilities 0 0 256,000 256,000 190,000 190,000 Stockholders' Equity Common stock, $5 par Additional paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 0 0 256,000 $ $ 190,000 Cash Flows from Oper Horiz Analysis Horiz Analysis Vertic Analysis Vertic Analysis Inc St Bal St Inc St Bal Sheet Ratios Choose Numerator Enter Numerator Value Enter Denominator Value Choose Denominator Ratio Current ratio Acid-test ratio Inventory turnover Days' sales in inventory Accounts receivable turnover Days' sales in receivables Total asset turnover Debt-to-equity ratio Profit margin Return on total assets Return on common stockholders' equity Price/earings ratio (P/E) Dividend yield