Question
OG Corporations balance sheet and income statement is listed below. Balance Sheet This Year Last Year Cash 50,000 40,000 Accounts receivable 80,000 60,000 Inventories 180,000
OG Corporations balance sheet and income statement is listed below.
Balance Sheet This Year Last Year
Cash | 50,000 | 40,000 |
Accounts receivable | 80,000 | 60,000 |
Inventories | 180,000 | 110,000 |
Plant & equipment | 300,000 | 260,000 |
Less accumulated depreciation | -40,000 | -20,000 |
Total assets | 570,000 | 450,000 |
Accounts payable |
100,000 |
150,000 |
Accrued liabilities | 70,000 | 50,000 |
Mortgage payable | 80,000 |
|
Common stock | 130,000 | 90,000 |
Retained earnings | 190,000 | 160,000 |
Total liabilities and equity | 570,000 | 450,000 |
Income Statement This Year Last Year
Net Sales | 680,000 | 600,000 |
Cost of goods sold | 410,000 | 330,000 |
Gross profit | 270,000 | 270,000 |
Operating expenses | 190,000 | 192,000 |
Operating income | 80,000 | 78,000 |
Interest expense | 7,000 | 2,000 |
Profit before taxes | 73,000 | 76,000 |
Taxes | 22,000 | 22,800 |
Net income | 51,000 | 53,200 |
Other data:
- Cash dividends paid this year were $21,000.
- The change in accumulated depreciation account is the depreciation for the year.
Answer the following five questions pertaining to the OG Corporation and be specific.
- Prepare a common size vertical analysis of OGs balance sheet in good form. Round percentages to one decimal place. (5 points)
- Prepare a common size vertical analysis of OGs income statement and reconcile the retained earnings account. Round percentages to one decimal place. (5 points)
- Prepare the current year statement of cash flows for OG Corporation using the indirect method and reconcile the cash account. (5 points)
- Based on the financial statements prepared in questions (1) and (2), calculate the efficiency ratios, liquidity ratios, leverage ratios, and profitability ratios for OG Corporation for this year. Where data is available, also calculate ratios for last year. Use a 360-day year. All sales are on credit to business customers. Assume an income tax rate of 30 percent. (7 points) Based upon your answers to parts (1) through (4) would you provide a credit line to this company? Support your decision by refere
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