Need B only

B. From your result above, can you explain in part the difference between net income and your CFFA calculation? Where has the money gone?

(CFFA calculation = 7.3)

Using the space provided, produce a common size income statement and common size balance sheet from the financial statements provided for Acme, Inc. on the first page. a. What is a significant change you see happening between 2015 and 2016? b. From your result above, can you explain in part the difference between net income and your CFFA calculation? Where has the money gone? c. Give 2 reasons for using common size financial statements. Acme Inc. - 2016 INCOME STATEMENT Net sales 1,750.0 Cost of goods sold 850.0 Depreciation 75.0 EBIT 825.0 Interest paid 70.0 Taxable income 755.0 Taxes 256.7 Net income 498.3 (All Dollars in Millions) as of 12/31/2015 as of 12/31/2016 Dividends Addition to retained earnings 124.6 373.7 ASSETS 2015 2016 Current Assets Cash Accounts Receivables Inventory Total Current Assets 120.0 450.0 310.0 140.0 450.0 520.0 Acme Inc. - BALANCE SHEET LIABILITIES & OWNERS' EQUITY 2016 2015 Current Liabilities 176.0 Accounts Payable 240.0 760.0 Notes Payable 210.0 640.0 Total Current Liabilities 450.0 1,576.0 Long-Term Debt 408.0 1,725.0 Owners' Equity (OE) Common Stock & Paid-in Surplus 562.0 Retained Earnings 1,320.0 Total Owners'Equity 1,882.0 1,090.0 454.0 Net Fixed Assets 1,650.0 703.3 1,693.7 2,397.0 TOTAL ASSETS 2,740.0 3,301.0 TOTAL LIABILITIES & OE 2,740.0 3,301.0 Acme Inc. Common-Size Balance Sheets as of December 31, 2015 and 2016 Assets Liabilities and Owners' Equity 2015 2015 2016 Change 2016 Change Current Assets Cash Accounts Receivables Inventory Total Current Assets $120 450 520 $1,090 4.38% 16.4254 18.9854 39.7854 $176 780 640 1,576 5.33% 23.02% 10.39% 47.74% 0.95% 8.80% 0.41% 7.86% Current Liabilities Accounts Payable Notes Payable Total Current Liabilities Long-Term Debt S240 210 S450 S108 8.76% 7.68% 16.42% 14.89% $310 140 $450 $454 9.39% 4.24% 13.63% 13.75% 0.63% -3.42% -2.79% -1.1456 Net Fixed Assets 1,650 80.22% 1.725 52.26% -7.96% Owners' Equity Common Stock & Pald-In Surplus Retained Earnings Total Owners' Equity Total Assets $2.740 100.00% $3,301 100.00% 0.00% S562 1,320 S1,212 20.51% 48.18% 88.89% $703 1,693 $2,397 21.30% 51.29% 72.61% 0.79% 3.11% 3.93% Total Liabilities & Owners' Equity S2,740 100.00 $3.301 100.00% 0.00% Depreciation Acme Inc Common-Size Income Statement as of 2016 Net Sales 1,750 100% COGS 350 49% 75 EBIT 825 47% Interest pala 70 Taxable income 755 Net Income 256.7 15% 498.3 28 Dividends 124.3 Addition to retained earnings 373.7 21%