Greasy SpoonRestaurant - Case 1

Greasy SpoonRestaurant
BalanceSheet

ASSETS

??  2017??   2016?????

Cash??????$12,000?$31,000
MarketableSecurities????  66,000??82,000
Accts. Rec.?????152,000?104,000
Inventories?????191,000?145,000
  Total CurrentAssets???  $421.000 $362,000

Gross FixedAssets???  $195,000 $180,000
Less: Accumulated Depreciation  63,000?52,000
Net FixedAssets???  $132,000 $128,000

TotalAssets????    $553,000  $490,000?

Liabilitiesand Equity

A/P?????  $136,000 $126,000
NotesPayable?????200,000?190,000
Accruals?????  27,000?  25,000
Total CurrentLiabilities??  $363,000 $341,000

Long Termdebt????    38,000     40,000

TotalLiabilities???  $401,000 $381,000

Equity
Common Stock (100,000 shares$.20 par) $ 20,000?$20,000
Paid in capital in excess ofpar 30,000 30,000
Retained earnings???102,000    59,000
TotalEquity ????  $152,000?$109,000

TotalLiabilities and Equity??    $553,000?$490,000

?

Greasy Spoon
IncomeStatement
2017

Revenue???$1,550,000
Less: Costof goods sold??  1,030,000
Gross Profit???$520,000
Less: OperatingExpenses
Selling Expense$150,000
G and A Expense270,000
DepreciationExp   11,000
TotalOperating expenses    431,000
OperatingProfits??$89,000
Less: Interest expense   29,000

Profit beforetax??$60,000
Less: taxes (20%)   12,000

Net ProfitAfter taxes??$48,000

GreasySpoon
Statement of Retainedearnings
2017

Retained earnings balance(1/1/2017)???$59,000
Plus: Netincome?????  48,000
Less:Dividends??????  5,000

Retainedearnings (12/31/17)????$102,000

Greasy Spoon Restaurant

Table 1

Profits, dividends,and retained earnings, 2011-2017

Year??NetProfit??DividendsPaid??Contributionto retained earnings

2011??($50,000)??$?0???($50,000)

2012??(20,000)???0???(20,000)

2013??  15,000????0???  15,000

2014??  35,000????0???  35,000

2015??  40,000???  1,000???  39,000

2016??  43,000???  3,000???  40,000

2017?   ?  48,000???  5,000???43,000

2016 AdditionalInformation needed to calculate the ratios

Revenue??$1,400,000
Cost ofgoods sold 1,000,000

Questions

1.Prepare a cash flowstatement for 2017.

2.Calculate thefollowing ratios for 2016 and 2017:

Current ratio, ROAand ROE using the DuPont models, inventory turnover, and earningsper share.

3.Compare the resultsin a narrative – simply state whether the company is doing betteror worse in these areas and describe why that is thecase.