FINANCIAL PROBLEMS 1
FinancialProblems
3.5A
BRANDYWINE
INCOMESTATEMENT
ASAT 2015
$
SALES 2,775,000
Add.Sales return 175,000
CASH 1,500,000
Costof sales
Openingstock 300,000
Add:purchases 975,000
Add:purchases 710,000
1,985,000
Otherincomes
Interestreceived on bonds 250,000
EXPENDITURE
DEPRECIATION 1,500,000
Rent 50,000
Salaries 140,000
Advertising 85,000
Utilitiesand supplies 85,000
Rent 70,000
Dividendpaid 3,500,000
Netprofit 1,255,000
B.NET INCOME = TOTAL REVENUES – TOTAL EXPENCES
=5,775,000 – 3,635,578
= 2,139,422
PROFITMARGIN = (2,139,422- 215,000)
= 1,924,422
BRANDYWINECash flow statement
2015
NETINCOME
Decreasein inventories (975,000 – 710,000) 265,000
Decreasein accounts payable (1,750,000 – 1,700,000) 50,000
Cashflow from operators 215,000
Dividendspaid out 3,500,000
Cashflow from financing 3,500,000
Netdecrease in cash and equivalent 3,285,000
Cashat the beginning of the year 3,500,000
Cashat the end of the year 215,000
C. Effects of doubling depreciation
Net income will be decreased
Profit margin will be decreased or reduced
The cash at the end of the year in the cash flow will be decreased
D.Effects of halving depreciation
Net income will be increased
Profit margin will be increased
The cash at the end of the year in the cash flow will be increased
Question4.5
The differences between the balance sheet in quiz 4.5 and the balance sheet in exhibit 4.1
There are receivable premiums worth $ 821 in the above balance sheet, but there are no receivable premiums in the balance presented in exhibit 4.1
The balance sheet in this question is has accrued expenses amounting to $ 921, but there are no accrued expenses in the balance sheet in exhibit 4.1
The net property and assets in this question is higher than the net property and equipment in the exhibit 4.1
The value of total liabilities and net assets in this question balance sheet is greater than the total liabilities presented in exhibit 4.1 balance sheet
There are no unrestricted equity in the balance sheet in exhibit 4.1 which are available in balance sheet in the question, and it is worth $ 2,118
Net working capital = current assets – current liabilities
=$ (3945 – 3456)
=$ 489
Best care’s debt ratio = total long term debt
Capitalemployed
=4295
2118
=2.0279
Bestcare’s debt ratio is higher than the Sunnyvale debt rationindicating Sunnyvale has lower long term debts in relation to theamount capital they invested into the business as compared to thebest care
Question4.6
Differences between the two balance sheets
There are receivable premiums worth $ 821 in the balance sheet in question 4.5, but there are no receivable premiums in the balance presented in exhibit 4.1 and the question 4.5
The balance sheet in question 4.5 has accrued expenses amounting to $ 921 while he balance sheet in question 4.6 has accrued expenses amounting to $ 192,900, but there are no accrued expenses in the balance sheet in exhibit 4.1
The net property and assets in this question is higher than the net property and equipment in both exhibit 4.1 and question 4.5
The value of total liabilities and net assets in this question balance sheet is greater than the total liabilities presented in exhibit 4.1 balance sheet and the one in question 4.5
There is no unrestricted equity in the balance sheet in exhibit 4.1 which are available in the balance sheet in the question, and it is worth $ 2,118. The unrestricted equity are also not available in question 4.6
The amount of total liabilities and shareholders’ equity in question 4.6 are higher than the ones in question 4.5 and exhibit 4.1
There are more assets and liabilities in question 4.6 balance sheet than the total amount of liabilities in the balance sheet of question 4.5 and exhibit 4.1
Net working capital = current assets – current liabilities
=608,992 – 445,150
= 163,842
Green Valley nursing home
Debtratio = totallong term debts
Capitalemployed
= 1,700,000
357,846
= 4.75070
Thegreen valley’s debt ratio is greater than both the Sunnyvale andbest car debt ratio. This implies that the long-term liabilities thatthe green valley has in comparison to the capital invested in thebusiness is higher than the other businesses.