Question

The following are financial statements of Vaughn Manufacturing.

Vaughn Manufacturing Income Statement For the Year Ended December 31, 2017
Net sales		$2,230,600
Cost of goods sold		1,028,200
Selling and administrative expenses		924,400
Interest expense		90,300
Income tax expense		70,610
Net income		$ 117,090

Vaughn Manufacturing Balance Sheet December 31, 2017
Assets
Current assets
Cash		$ 72,200
Debt investments		85,610
Accounts receivable (net)		189,000
Inventory		162,400
Total current assets		509,210
Plant assets (net)		591,100
Total assets		$ 1,100,310
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		$ 172,100
Income taxes payable		37,110
Total current liabilities		209,210
Bonds payable		219,200
Total liabilities		428,410
Stockholders’ equity
Common stock		365,800
Retained earnings		306,100
Total stockholders’ equity		671,900
Total liabilities and stockholders’ equity		$1,100,310

Additional information: The net cash provided by operating activities for 2017 was $202,900. The cash used for capital expenditures was $107,800. The cash used for dividends was $32,610. The weighted-average number of shares outstanding during the year was 50,000.

(a)

Compute the following values and ratios for 2017. (We provide the results from 2016 for comparative purposes.) (Round Current Ratio and Earnings per share to 2 decimal places, e.g. 15.25 and Debt to assets ratio to 1 decimal place, e.g. 78.9%. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

(i)		Working capital. (2016: $160,500)
(ii)		Current ratio. (2016: 1.65:1)
(iii)		Free cash flow. (2016: $48,700)
(iv)		Debt to assets ratio. (2016: 31%)
(v)		Earnings per share. (2016: $3.15)

(i)		Working capital		$
(ii)		Current ratio			:1
(iii)		Free cash flow		$
(iv)		Debt to assets ratio			%
(v)		Earnings per share		$

Answer 1

Ratios for 2017

(i) Working capital : current Assets- current liabilities = 509,210 - 209,210 = $300,000

(ii) Current ratio = current Assets/ current liabilities = 509,210 /209,210 = 2.43 : 1

(iii) Free Cash flow= Net cash provided by operating activities- net cash used for capital expenditure- net cash used for dividend

= 202,900-107,800-32,610 = $ 62,490

(iv) Debt to asset ratio= Debts / Assets *100 = 428,410 /1100,310 *100   = 38.9%

(v) Earning per share = Net income available for common shatreholder/ number of common shares

                              = 117,090 / 50,000 = $ 2.34 per share