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Special Project: I.(2.5 points) Presented below are the financial statements of Molina Company. MOLINA COMPANY Comparative Balance Sheets December 31 Assets 2008 2007 Cash $ 28,000 $ 33,000 Accounts receivable 23,000 14,000 Merchandise inventory 41,000 25,000 Property, plant, and equipment $70,000 Less: Accumulated depreciation (27,000) Total $ 78,000 43,000 (24,000) 54,000 135,000 $126,000 $ 31,000 $ 43,000 Income taxes payable 26,000 20,000 Bonds payable 20,000 20,000 Common stock 25,000 25,000 Retained earnings 33,000 28,000 $135,000 $126,000 Liabilities and Stockholders' Equity Accounts payable Total MOLINA COMPANY Income Statement For the Year Ended December 31, 2008 Sales $286,000 Cost of goods sold 194,000 Gross profit Selling expenses Administrative expenses Income from operations Interest expense 92,000 $28,000 9,000 37,000 55,000 7,000 Income before income taxes 48,000 Income tax expense 10,000 Net income $ 38,000 Additional data: a. Dividends of $33,000 were declared and paid. b. During the year equipment was sold for $10,000 cash. This equipment cost $13,000 originally and had a book value of $10,000 at the time of sale. c. All depreciation expense, $6,000, is in the selling expense category. d. All sales and purchases are on account. e. Additional equipment was purchased for $5,000 cash. Instructions a. Prepare a statement of cash flows using the indirect method. b. Compute free cash flow. II. (2.5 points) Selected financial data of Target and WalMart for 2005 are presented here (in millions). Target Corporation Wal-Mart Stores, Inc. Income Statement Data for Year Net sales $45,682 $285,222 Cost of goods sold 31,445 219,793 Selling and administrative expenses 10,480 51,354 570 986 Other income (expense) 1,157 2,767 Income tax expense 1,146 5,589 $ 3,198 $ 10,267 Interest expense Net income Balance Sheet Data (End of Year) Current assets $13,922 $ 38,491 18,371 81,732 Total assets $32,293 $120,223 Current liabilities $ 8,220 $ 42,888 Long-term debt 11,044 27,939 Total stockholders' equity 13,029 49,396 $32,293 $120,223 Noncurrent assets Total liabilities and stockholders' equity Target Corporation Wal-Mart Stores, Inc. Income Statement Data for Year Beginning-of-Year Balances Total assets Total stockholders' equity Current liabilities Total liabilities $31,416 $105,405 11,132 43,623 8,314 40,364 20,284 61,782 Other Data Average net receivables $4,845 $ 1,485 Average inventory 4,958 28,030 Net cash provided by operating activities 3,821 15,044 Instructions a. For each company, compute the following ratios. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Current. Receivables turnover. Average collection period. Inventory turnover. Days in inventory. Profit margin. Asset turnover. Return on assets. Return on common stockholders' equity. Debt to total assets. Times interest earned. b. Compare the liquidity, solvency, and profitability of the two companies. c. Which company has the greater: a. liquidity b. solvency c. profitability