Question

a) Use the following information for Company COLTIB to create the Balance Sheet and the Income Statement for 2017 and 2018, Tax rate is 30% for both 2017 and 2018. In 2017' depreciation was 500 2017 2,000 2,500 800 100 Sales for the year Accumulated Depreciation as of Dec 31st Cost of Goods Sold for the vear Other Expenses for the vear Interest for the vear Cash as of Dec 31st Accounts Receivable as of Dec 31st Short-term Notes Pavable as of Dec 31 st Long-term Debt as of Dec 31st Total Gross Fixed Assets as of Dec 31st Accounts Pavable as of Dec 31$t Inventory as of Dec 31St Dividends for the vear Accumulated Retained Earnings 2018 2,400 3,000 1,000 200 10% of the Long-term Debt as of the end of the year 800 310 317 2,000 8,000 300 640 300 250 450 1,800 8,000 500 600 One third of the Net Income You should find it, given that this is the only account under Equit b) Company X has not issued or bought back new stock for the last five years. Calculate total equity for 2016 c) How does the Sales and Total Assets change from 2017 to 18? Do you see this as a positive or a negative change vis-à-vis company's financial health?

Answer 1

a)	INCOME STATEMENT
		2017	2018	% Change
	Sales	2000.00	2400.00	20.00%
	Cost of goods sold	800.00	1000.00
	Depreciation	500.00	500.00
	Other expenses	100.00	200.00
	EBIT	600.00	700.00
	Interest	180.00	200.00
	Income before tax	420.00	500.00
	Tax at 30%	126.00	150.00
	Net income	294.00	350.00
	Dividends (1/3rd)	98.00	117.00
	Addition to retained earnings	196.00	233.00
	BALANCE SHEET
	Current assets:
	Cash	300	800	166.67%
	Accounts receivable	250	310	24.00%
	Inventory	600	640	6.67%
	Total current assets	1150	1750	52.17%
	Gross fixed assets	8000	8000	0.00%
	Accumulated depreciation	2500	3000	20.00%
	Net fixed assets	5500	5000	-9.09%
	Total assets	6650	6750	1.50%
	Current liabilities:
	Accounts payable	500	300	-40.00%
	Short term notes payable	450	317	-29.56%
	Total current liabilities	950	617	-35.05%
	Long term debt	1800	2000	11.11%
	Total liabilities	2750	2617	-4.84%
	Equity+Retained earnings	3900	4133	5.97%
	Total liabilities and Stockholders' equity	6650	6750	1.50%
b)	Total equity for 2016 cannot be calculated as no information is
	available to get it from details of 2017.
	For 2017 it is $3900 and for 2018 it is $4133.
c)	Sales has increased by 20% in 2018 but Total assets has increased by
	by 1.5% only. It cannot be interpreted as a negative change as the
	short term liabilities have been paid off substantially by using the increase in
	retained earnings and taking more long term debt.
	The relevant ratios are:
	Current ratio	1.21	2.84
	Total debt ratio	0.41	0.39
	Times interest earned ratio	3.33	3.50
	The liquidity and solvency ratios have improved as also the TIE.
	All the above indicate improvement in financial health.