December 31, 2019. COMPULSORY QUESTION (25 Marks) GOLDEN ENTERPRISES INC. BALANMCE SHEET DECEMBER 31, 2019 2019 2018 ASSETS (S) (S) Cash 21,600 15,600 Accounts receivable 33,050 21.000 Merchandise inventory 38,000 42,000 Prepaid expenses 1,000 1,500 Property, plant, and equipment 170,000 157,000 Accumulated Amortization (34,000) (24,000) Goodwill 15.000 15.000 TOTAL SEETS 244,650 228 100 LIABILITIES Accounts payable 15,000 18.5 00 Nots payable 2.000 3,500 Mortgage payable 40.000 45.0 00 TOTAL LIABILITIES 57,000 67 ,000 SHAREHOLDER'S EQUITY Preferred shares (8000 shares, #2.00, Callable at $15.00 per share) 48,000 48,000 Common share (2019-12,000 share 2018 - 8000 shares) 81,000 65,000 Retained earnings 58,650 48.1 00 TOTAL SHAREHOLDER'S EQUITY 187.650 161.100 TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY 244,650 228,100 GOLDEN ENTERPRISES INC. STATEMENT OF RETAINED EARNING FOR THE YEAR ENDED DECEMBER 31, 2019 Retained earnings, January 1, 2019 $48,100 Add: Net income for 20189 49,700 Less: Dividend Preferred $16.000 Dividend Common 23.150 39.150 Retained earnings, December 31, 2019 $58,650 GOLDEN ENTERPRISES INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Net sales Revenue $330,000 Cost of goods sold 190.000 Goss margin 140.000 Operating Expenses Administrative expenses 23,000 Selling expenses 40,000 Interest expenses 6.000 Total Operating Expenses 69.000 Operating Income 71.000 Income Tax 21.300 NET INCOME $ 49,700 REQUIREMENTS 1. Do the ratio analysis of the company using all the ratios and compare with the standards for the year 2019. 2. Write a Financial Analysis Report based on the ratios worked out about the final health of the company for management decision making. Name Ratios Used in Financial Statement Analysis Formula Interpretation Measuring the company's ability to pay current liabilities (liquidity): 1. Current ratio Current assets Measures ability to pay current liabilities with Current liabilities current assets. 2. Acid-test (quick) ratio Cash+Short-term investments Shows ability to pay all current liabilities if they + Net current receivables come due immediately Current liabilities Measuring the company's ability to sell inventory and collect receivables (efficiency): 3. Inventory turnover Cost of goods sold Indicates saleability of inventory--the number Average inventory of times a company sells its average amount of inventory during a year. 4. Accounts receivable Net credit sales Measures ability to collect cash from credit turnover Average net customers. accounts receivable 5. Days' sales in receivables One day's sales - Net sales/365 days Shows how many days' sales remain in Accounts Receivable-how many days it takes to collect Average net the average level of receivables. accounts receivable One day's sales Measuring the company's ability to pay long-term debt (solvency): 6. Debt ratio Total liabilities Indicates the percentage of assets financed with Total assets debt. 7. Times-interest-eared ratio Income from operations Measures the number of times operating income Interest expense can cover interest expense. Measuring the company's profitability: 8. Rate of return on net sales Net income Shows the percentage of each sales dollar earned (profit margin) Net sales as net income 9. Rate of return on total Net income + Interest expense Measures how profitably a company uses its assets Average total assets assets. 10. Rate of return on common Net income - Preferred dividends Gauges how much income is eamed for each shareholders' equity Average common dollar invested by common shareholders. shareholders' equity 11. Eamings per common share Net income - Preferred dividends Gives the amount of earnings earned for each of Weighted average number of the company's common shares. common shares outstanding Analyzing the company's shares as an investment (value): 12. Price-camnings ratio Market price per common share Indicates the market price of $1 of earnings Earnings per share 13. Dividend yield Annual dividends per Shows the percentage of the market price of each common (or preferred) share share returned as dividends to shareholders each Market price per period. common (or preferred) share 14. Book value per common Total shareholders' equity Indicates the recorded accounting amount for - Preferred equity each common share outstanding Number of common shares outstanding share December 31, 2019. COMPULSORY QUESTION (25 Marks) GOLDEN ENTERPRISES INC. BALANMCE SHEET DECEMBER 31, 2019 2019 2018 ASSETS (S) (S) Cash 21,600 15,600 Accounts receivable 33,050 21.000 Merchandise inventory 38,000 42,000 Prepaid expenses 1,000 1,500 Property, plant, and equipment 170,000 157,000 Accumulated Amortization (34,000) (24,000) Goodwill 15.000 15.000 TOTAL SEETS 244,650 228 100 LIABILITIES Accounts payable 15,000 18.5 00 Nots payable 2.000 3,500 Mortgage payable 40.000 45.0 00 TOTAL LIABILITIES 57,000 67 ,000 SHAREHOLDER'S EQUITY Preferred shares (8000 shares, #2.00, Callable at $15.00 per share) 48,000 48,000 Common share (2019-12,000 share 2018 - 8000 shares) 81,000 65,000 Retained earnings 58,650 48.1 00 TOTAL SHAREHOLDER'S EQUITY 187.650 161.100 TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY 244,650 228,100 GOLDEN ENTERPRISES INC. STATEMENT OF RETAINED EARNING FOR THE YEAR ENDED DECEMBER 31, 2019 Retained earnings, January 1, 2019 $48,100 Add: Net income for 20189 49,700 Less: Dividend Preferred $16.000 Dividend Common 23.150 39.150 Retained earnings, December 31, 2019 $58,650 GOLDEN ENTERPRISES INC. INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2019 Net sales Revenue $330,000 Cost of goods sold 190.000 Goss margin 140.000 Operating Expenses Administrative expenses 23,000 Selling expenses 40,000 Interest expenses 6.000 Total Operating Expenses 69.000 Operating Income 71.000 Income Tax 21.300 NET INCOME $ 49,700 REQUIREMENTS 1. Do the ratio analysis of the company using all the ratios and compare with the standards for the year 2019. 2. Write a Financial Analysis Report based on the ratios worked out about the final health of the company for management decision making. Name Ratios Used in Financial Statement Analysis Formula Interpretation Measuring the company's ability to pay current liabilities (liquidity): 1. Current ratio Current assets Measures ability to pay current liabilities with Current liabilities current assets. 2. Acid-test (quick) ratio Cash+Short-term investments Shows ability to pay all current liabilities if they + Net current receivables come due immediately Current liabilities Measuring the company's ability to sell inventory and collect receivables (efficiency): 3. Inventory turnover Cost of goods sold Indicates saleability of inventory--the number Average inventory of times a company sells its average amount of inventory during a year. 4. Accounts receivable Net credit sales Measures ability to collect cash from credit turnover Average net customers. accounts receivable 5. Days' sales in receivables One day's sales - Net sales/365 days Shows how many days' sales remain in Accounts Receivable-how many days it takes to collect Average net the average level of receivables. accounts receivable One day's sales Measuring the company's ability to pay long-term debt (solvency): 6. Debt ratio Total liabilities Indicates the percentage of assets financed with Total assets debt. 7. Times-interest-eared ratio Income from operations Measures the number of times operating income Interest expense can cover interest expense. Measuring the company's profitability: 8. Rate of return on net sales Net income Shows the percentage of each sales dollar earned (profit margin) Net sales as net income 9. Rate of return on total Net income + Interest expense Measures how profitably a company uses its assets Average total assets assets. 10. Rate of return on common Net income - Preferred dividends Gauges how much income is eamed for each shareholders' equity Average common dollar invested by common shareholders. shareholders' equity 11. Eamings per common share Net income - Preferred dividends Gives the amount of earnings earned for each of Weighted average number of the company's common shares. common shares outstanding Analyzing the company's shares as an investment (value): 12. Price-camnings ratio Market price per common share Indicates the market price of $1 of earnings Earnings per share 13. Dividend yield Annual dividends per Shows the percentage of the market price of each common (or preferred) share share returned as dividends to shareholders each Market price per period. common (or preferred) share 14. Book value per common Total shareholders' equity Indicates the recorded accounting amount for - Preferred equity each common share outstanding Number of common shares outstanding share