NORTHEAST ART SUPPLY, INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31,2017 CASH FLOW FROM OPERATING ACTIVITIES: $30,175 Net Income Adjustments to reconcile net income to net cash flows S 8,500 Decrease in accounts receivable Increase in inventory Increase in accounts payable Increase in income taxes payable 1,000 (5,000) 6,000 3.000 13.500 $43,675 Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Equipment Purchase of Investments Sale of Investments $ (2,000) (10,000) 20,000 Net cash provided by investing activities 8,000 CASH FLOW FROM FINANCING ACTIVITIES: Payments on debt Payment of dividends $(23,000) (5.000) Net cash provided by financing activities (28.000 NET INCREASE IN CASH Cash at beginning of the year CASH AT END OF YEAR $23,675 $35.325 $59000 NORTHEAST ART SUPPLY, INC BALANCE SHEET DECEMBER 31, 2017 CURRENT ASSETS Cash Marketable securities Accounts Receivable Less Allowance for Doubtful Accounts$ 2.000 Notes Receivable Merchandise Inventory Prepaid Expenses $59,000 $10,000 $40,000 $38,000 $32,000 $41,000 $ 2.000 $182.000 Total Current Assets FIXED ASSETS Delivery Equipment Less Accumulated Depreciation Furniture and Fixtures 110,000 $90,000 62,000 $47.000 Total Fixed Assets INTANGIBLE ASSETS $137,000 Patents 21,000 Total Intangible Assets TOTAL ASSETS LIABILITIES AND STOCKHOLDERS EQUITY CURRENT LIABILITIES Accounts Payable Notes Payable Salaries Payable Taxes Payable $35,000 $25,675 4,000 $5,325 Total Current Liabilities LONG-TERM LIABILITIES $70,000 Mortgage payable on store equipment $40,000 Total Long-Term Liabilities TOTAL LIABILITIES STOCKHOLDER'S EQUITY $40,000 $110,000 Common Stock (25,000 times $6) Retained Earnings $150,000 TOTAL OWNERS EQUITY TOTAL LIABILITIES AND OWNERS EQUITY $230,000 NORTHEAST ART SUPPLY, INC INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017 REVENUES Gross Sales Less Sales Returns and Allowances Less Sales Discounts $465,000 $9,500 Net Sales -4500 4,000 $451,000 COST OF GOODS SOLD Beginning Inventory, January 1, 2017 Purchases Less Purchase Discounts $40,000 $346,000 Net Purchases Cost of Goods Available For Sale Less Ending Inventory, December 31, 2017 $375,000 Cost of Goods Sold GROSS PROFIT $117,000 OPERATING EXPENSES Selling Expenses 22,000 Sales Salaries Advertising Sales promotion Depreciation-store equipment Depreciation-delivery equipment Miscellaneous selling expenses 4,000 2,500 3,000 4,000 37,000 Total Selling Expenses General Expenses Office Salaries Rent Depreciation-furniture Utilities expense Insurance expense Miscellaneous expense $28,500 8,500 1,500 2,500 1,000 Total General Expenses Total Operating Expenses Net income from Operations Less Interest Expense $37,500 NET INCOME BEFORE TAXES Less Federal Income Taxes $35,500 5.325 NET INCOME AFTER TAXES $30,175 NORTHEAST ART SUPPLY, INC. FINANCIAL ANALYSIS PROJE REQUIREMENTS CT Under Week 12 of the course, you will find links that open the following information for Northeast Art Supply, Ine. 1. Northeast Art Supply, Inc. Balance Sheet as of December 31, 2017 2. Northeast Art Supply, Inc. Income Statement for the Year Ended December 31, 2017 Northeast Art Supply, Inc. Cash Flow Statement for the Year Ended December 31, 2017 3. These statements will be used to complete this project. This projet is due on Sunday, April 14, 2019 and will count 50 points toward your final grade. This project requires that you complete the following assignments: Part I: Financial Analysis: For this section you need to complete the following ratio calc ulations for Northeast Art Supply, Inc. Make certain to include all calculations with the completion of this section of the assignment. For the Year Ended December 31, 2017 caleulate the following ratios for Northeast Art Supply, Inc. (Make certain to include all calculations in your response): Liquidity Ratios I. Current Ratio = Current Assets Divided By Current Liabilities (182,000 / 70,000) 2. Quick Ratio Quick Assets Divided By Current Liabilities The Quick Ratio includes only the company's assets that can be converted to cash and excludes inventory Leverage Ratios 3. Debt Ratio Total Debt (or Liabilities) Divided By Total Assets 4. Debt-to-Net Worth Ratio Total Debt (or Liabilities) Divided by Tangible Net Worth Tangible Net Worth is defined as capital + capital stock+ earned surplus+ retained any intangible assets (goodwill), 5. Times Interest Earned Ratio Earnings before interest and taxes (or EBIT) Divided By Total Interest Expense Operating Ratios 6. Average-Inventory-Turnover Ratio Cost of Goods Sold Divided by Average Inventory Average Inventory is the sum of the value of the firm's inventory at the beginning of the accounting period and its value at the end of the accounting period divided by 2 7. Average Collection Period Ratio Receivables Turnover Ratio Credit Sales Divided By Accounts Receivable Average-collection-period ratio Days in accounting period Divided by Receivables turnover Ratio 8. Average-Payables-Period-Ratio Payables turnover ratio Purchases Divided by Accounts Payable Average-payable-period ratio Days in the accounting period Divided by Payable turnover ratio 9. Net-Sales-to-Total-Assets Ratio Total assets turnover ratio Net Sales Divided by Net Total Assets Profitability Ratios 10. Net-Profit-on-Sales Ratio Net-Profit-on-Sales Ratio Net Profit Divided by Net Sales 11. Net-Profit-to-Assets Ratio Net-Profit-to-Assets Ratio Net Profit Divided by Total Assets 12. Net-Profit-to-Equity Ratio Net-Profit-to-Equity Ratio Net Profit Divided by Owners' Equity (or Net Worth) l Analysis Questions. Please be complete in your responses to each of the Part II: Financial questions listed below: 1. Define the following terms: a. Balance Sheet b. Income Statement c. Cash Flow Statement What is the purpose of ratio analysis? What would be the benefit of comparing the performance of Northeast Art Supply, Inc. to 2- industry data for companies of the same size? 4. What information can be learned about the performance of Northeast Art Supply, Inc. from the calculation of the following sets of ratios? In answering this question please refer to the ratios that you calculated for Northeast Art Supply, Inc. in Part I above. a. Liquidity Ratios b. Leverage Ratios c. Operating Ratios d. Profitability Ratios Grading of the Northeast Art Supply, Inc. Financial Analysis Project This project will count for a total of 50 points toward your final grade in this class. Financial Ratio Analysis will count 36 points (each ratio calculation will count 3 points each). Part II: Financial Analysis Questions will eount 16 points (each question is worth 4 points). Part