Question

Financial Statements Questions

Showing Calculations for each:

BALANCE SHEETS 2016 2,860 1. Use the following financial statements to answer questions (Dollars are stated in $millions) INCOME STATEMENT 2015 2016 2015 2016 Net Sales 8,360 9,610 Cash 310 405 Cost of goods sol 5,247 6,310 Accounts rec. 2,640 3,055 Depreciation 1,340 1,370 Inventory 3.275 3,850 EBIT 1,773 1,930 Current assets 6,225 7,310 Interest 620 630 Net fixed assets 10,960 10,670 Taxable income 1,153 1,300 Taxes 403 455 Total assets 17,185 17,980 Net Income 750 845 Shares outstanding Market price Accounts payable Notes payable Current liabilities Long-term debt Common stock Retained earnings Total liabilities and ec 2015 2,720 100 2,820 7,875 5,000 1,490 17,185 2,860 7,810 5,250 2,060 17,980 50,000 23.37 $ 1a. Calculate the following for 2015 and 2016 2015 2016 A. Current ratio B. Inventory turnover C. Total debt to equity D. Debt to Total Assets 1b. Identify whether each of the following items is a source or use of cash in 2016. SOURCE USE A. Cash Decrease B. Inventory Increase C. Accounts payable Increase D. Net fixed assets Decrease E. Retained earnings Increase

Answer 1

A. Current ratio for the year 2015 :

=Current assets/ Current liabilities

= $6225/ $2,820

= 2.2074

Similarly, for the year 2016 the current ratio is ,

= $7,310/$2,860

= 2.5559

B. The inventory turnover ratio for 2015 :

= COGS/ INVENTORY

= $5247/ $3275

= 1.6021

Similarly, for the year 2016 the ratio is :

= $6,310/ $3,850

= 1.6390

Total debt to equity ratio for 2015 is :

= current liabilities + long term debt/ equity

= $10,695/ $6,490

= 1.6479

Similarly, the inventory turnover ratio for 2016 is :

= $7810/ $17980

= 1.4596

The debt to total assets ratio for 2015 is :

= $10,695/ $17,185

= 0.6223

Similarly, for 2016 the ratio is :

= 10,695/ 17,980

= 0.5948

A.The cash decrease is a use of cash.

B. Inventory increase is a use of cash, as it indicates an outflow of cash.

C.Accounts payable increase is a Source of cash.
As accounts payable is not being paid so it is a source of cash.

D. Net fixed asset decrease: Source of cash.

The net fixed assets after being sold generates cash.

E. Retained earnings increase: Source of cash.

Increase in retained earnings is a source of cash.