Question

Flounder Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Flounder and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2018, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,020 notes, which are due on June 30. 2018. and September 30, 2018. Another note of $6,040 is due on March 31, 2019, but he expects no difficulty in paying this note on its due date. Brown explained that Flounder's cash flow problems are due primarily to the company's desire to finance a $302,480 plant expansion over the next 2 fiscal years through internally generated funds. The commercial loan officer of Topeka National Bank requested the following financial reports for the last 2 fiscal years. FLOUNDER CORPORATION BALANCE SHEET MARCH 31 Assets 2018 2017 Cash $18,370 $12,530 Notes receivable 148,910 132,190 Accounts receivable (net) 131.240 125.020 Inventories (at cost) 105,170 50.210 Plant & equipment (net of depreciation) 1,447,150 1,413,460 Total assets $1,850,840 $1,733,410 Liabilities and Owners' Equity. Accounts payable $78,640 $91,420 Notes payable 75,850 61,660 Accrued liabilities 9,040 8,340 Common stock (130,000 shares, $10 par) 1,310,790 1,300,030 Retained earnings 376,520 271,960 Total liabilities and stockholders' equity $1,850,840 $1,733,410 -Cash dividends were paid at the rate of $1 per share in fiscal year 2017 and $2 per share in fiscal year 2018.

Answer 1

current ratio= current assets /current liabilities
current assets		2017	2018
cash		12530	18370
notes receivable		132190	148910
accounts receivable		125020	131240
inventories		50210	105170
total current assets		319950	403690
Current laibilities		2017	2018
accounts payable		91420	78640
notes payable		61660	75850
accrued liabilities		8340	9040
total current liabilities		161420	163530
Current ratio - 2017
319950/161420 = 1.98:1
current ratio-2018
403690/163530 =2.47:1
2) acid test ratio = current assets-inventory/current liabilities
2017 = (319950-50210)/161420 = 1.67:1
2018 = (403690-105170)/163530 = 1.83:1
3) inventory turnover = cost of goods sold/average inventory
inventory turnover = 1538400/(50210+105170)/2
inventory turnover = 19.80 times
4)return on assets = net income /average total assets
average total assets = (1694120+1733410)/2 = 1713765
2017 = 291462/1713765 = 17.01%
2018 average total assets = 1733410+1850840/2 = 1792125
return on assets = 359214/1792125 = 20.04%
5)percentage change
sale revenue = sale revenue (2018)-sale revenue(2017)/sale revenue 2017
sale revenue = (3001980-2700330)/2700330
saele revenue = 11.17%
cost of goods sold = (1538400-1427160)/1427160 = 7.79%
gross margin = (1463580-1273170)/1273170 = 14.96%
net income = (359214-291462)/291462 = 23.25%