Prepare a balance sheet from the following information. What is the net working capital and debt ratio?

DATA

Cash	75,000
Account receivables	64,050
Accounts payable	34,500
Short-term notes payable	15,750
Inventories	60,000
Gross fixed assets	1,920,000
Other current assets	7,500
Accumulated depreciation	468,000
Long-term debt	300,000
Common stock	735,000
Other assets	22,500
Retained earnings	?

Solution

Balance Sheet:
Cash
Accounts receivable
Inventories
Other current assets
Total current assets
Gross Buildings and equipment
Accumulated Depreciation
Net fixed assets
Other assets
Total assets
Notes payable
Accounts payable
Total current liabilities
Long-term debt
Total Liabilities
Common Stock
Retained earnings
Total equity
Total liabilities and equity
Net Working Capital =
Debt Ratio =

Problem 3-2: Computing Cash Flows

Given the following information, prepare a statement of cash flows.

DATA
Increase in accounts receivable	75
Increase in inventories	90
Operating Income	225
Interest Expense	75
Increase in accounts payable	75
Dividends	45
Increase in common stock	60
Increase in net fixed assets	69
Depreciation Expense	36
Income taxes	51
Beginning cash	60

Solution
Cash Flows from Operating Activities
*Net Income
Adjustments:
Depreciation
Increase in accounts receivable
Increase in inventories
Increase in account payable
Net Cash provided by operating activities
Cash Flows from Investing Activities
**Increase in gross fixed assets
Cash Flows from Financing Activities
Increase in common stock
Dividends
Net cash provided by financing activities
Decrease in Cash
Beginning Cash
Ending cash

*Net Income = Operating Income – Interest Expense – Income taxes

**The change in gross fixed assets is equal to the change in net fixed assets plus the depreciation expense for the year of, resulting in a change in gross fixed assets.

Prepare a statement of cash flows from the following scrambled list of items.

DATA
Increase in inventories		17,500
Operating income		547,500
Dividends		72,500
Increase in accounts payables		107,500
Interest expense		112,500
Increase in common stock		12,500
Depreciation expense		42,500
Increase in accounts receivable		172,500
Increase in long-term debt		132,500
Increase in short-term notes payable		37,500
Increase in gross fixed assets		135,000
Increase in paid in capital		50,000
Income taxes		112,500
Beginning cash		625,000

Solution
Cash Flows from Operating Activities
Net Income
Adjustments:
Depreciation
Increase in accounts receivable
Increase in inventories
Increase in account payable
Net Cash provided by operating activities
Cash Flows from Investing Activities
Increase in plant and equipment
Cash Flows from Financing Activities
Increase in notes payable
Increase in long-term debt
Issued new common stock
Dividends
Net cash provided by financing activities
Net Decrease in cash
Beginning cash
Ending cash

Problem 3-4: Ratio Analysis

The Balance Sheet and Income Statement for Saudi Manufacturing Corporation are as follows:

DATA
Balance Sheet:
Cash	22,500
Acct/Rec	90,000
Inventories	45,000
Current assets	157,500
Net fixed assets	202,500
Total assets	360,000
Accts/Pay	49,500
Accrued expenses	27,000
Short-term N/P	13,500
Current liabilities	90,000
Long-term debt	90,000
Owner's equity	180,000
Total liabilities and owners’ equity	360,000
Income Statement:
Net sales	360,000
COGS	148,500
Gross profit