Question
Imagine you are looking at the balance sheets and income statements of COMPANY A and COMPANY B as well as the ff. background info: COMPANY
Imagine you are looking at the balance sheets and income statements of COMPANY A and COMPANY B as well as the ff. background info:
COMPANY A:
- This is a restaurant that sources its ingredients from suppliers within a 50 mile radius and typically makes the payment in 15-20 days.
- They make deliveries using 2 vans (owned by the company) that depreciates over 10 years.
- They only accept cash payments from customers.
- They are a sole proprietorship (no outside investors) and have been able to finance operations solely from sales and the owner's original investment w. the exception of a $50,000 bank loan still outstanding with the bank.
- The co. owns the land and building it operates on and uses it as collateral on the bank loan.
- Due to increased competition, the co.'s expenses exceeded revenue the last fiscal year.
COMPANY B:
- They are planners that sell travel packages.
- All sales are made on account (credit) with a full payment expectation within 30 days.
- They rent long term assets (computers, furniture, etc.).
- They are funded by a group of investors who purchased stock.
- Investors are paid $500 yearly dividend.
- They have office supplies on credit from a supplier store.
- They had a bank loan 5 years ago but already paid it off and has no debt to that bank since.
- Their net profit margin is 37%.
INSTRUCTIONS:
- List 4 differences you will see in financial statements of companies A and B.
- Name the account and document info. that you used to come to your conclusion.
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