Question

ndensed balance sheet and income statement data for Danke Corporation are presented here and following.

Danke Corporation Balance Sheets December 31
Assets		2022		2021
Cash		$ 28,000		$ 20,000
Receivables (net)		70,000		62,000
Other current assets		90,000		73,000
Long-term investments		62,000		60,000
Plant and equipment (net)		510,000		470,000
Total assets		$ 760,000		685,000
Liabilities and Stockholders’ Equity
Current liabilities		$ 75,000		$ 70,000
Long-term liabilities		80,000		90,000
Common stock		330,000		300,000
Retained earnings		275,000		225,000
Total liabilities and stockholders’ equity		$ 760,000		$ 685,000

Danke Corporation Income Statements For the Years Ended December 31
		2022		2021
Sales revenue		$750,000		$680,000
Cost of goods sold		440,000		400,000
Operating expenses (including income taxes)		240,000		220,000
Net income		$ 70,000		$ 60,000

Additional information:

Net cash provided by operating activities		$82,000		$56,000
Cash used for capital expenditures		$45,000		$38,000
Dividends paid		$20,000		$15,000
Weighted-average common shares outstanding		33,000		30,000

(a)		Earnings per share. (2021: $2; 2022: $2.12)
(b)		Working Capital. (2021: 85,000; 2022: 113,000)
(c)		Current ratio. (2021: 2.2:1; 2022: 2.5:1)
(d)		Debt to assets ratio. (2021: 23.4%; 2022: 20.4%)
(e)		Free cash flow. (2021: $3,000; 2022: 17,000)

(f)

Discuss briefly the improvement or lack thereof in financial position and operating results from 2021 to 2022 of Danke Corporation

Answer 1

Danke Corporation

Comparison table:

		2021	2022	Change
1	Earnings per share	$ 2	$ 2.12	Increased
2	Working capital	$ 85,000	$ 113,000	Increased
3	Current ratio	2.2	2.5	Increased
4	Debt to assets ratio	23.4%	20.4%	Decreased
5	Free cash flows	$ 3000	$ 17,000	Increased

Working capital and current ratio are Increased from 2021 to 2022, Danke Corporation Increases ability to meet it's Current liabilities by realising Current assets. Debt to assets ratio was decreased which indicates that portion of the debt is decreased from 2021 to 2022, the volume of liabilities (short term + long term) is decreased in relation to the assets which strengthen financial position. Danke Corporation will have surplus proceeds of assets even they meet liabilities in liquidation.

Earnings per share and Free cash flows are in increasing trend from 2021 to 2022, even though weighted average number of shares outstanding were in Increasing trend from 2021 to 2022, Earnings per share also in Increasing trend that clearly indicates that Danke Corporation operating result are better in 2022 than 2021.