Business Finance Answers_Part_6

Business Finance Answers_Part_6 - CHAPTER 3 B-21 The...

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CHAPTER 3 B-21 The common-base year answers for Question 14 are found by dividing each category value for 2009 by the same category value for 2008. For example, the cash common-base year number is found by: $10,157 / $8,436 = 1.2040 This means the cash balance in 2009 is 1.2040 times as large as the cash balance in 2008. The common-size, common-base year answers for Question 15 are found by dividing the common- size percentage for 2009 by the common-size percentage for 2008. For example, the cash calculation is found by: 3.13% / 2.86% = 1.0961 This tells us that cash, as a percentage of assets, increased by 9.61%. 16. 2008 Sources/Uses 2008 Assets Current assets Cash $8,436 $1,721 U $10,157 Accounts receivable 21,530 1,876 U 23,406 Inventory 38,760 3,890 U 42,650 Total $68,726 $7,487 U $76,213 Fixed assets Net plant and equipment $226,706 $21,600 U $248,306 Total assets $295,432 $29,087 U $324,519 Liabilities and Owners’ Equity Current liabilities Accounts payable $43,050 3,771 S $46,821 Notes payable 18,384 –1,002 U 17,382 Total $61,434 2,769 S $64,203 Long-term debt 25,000 $7,000 S 32,000 Owners' equity Common stock and paid-in surplus $40,000 $0 $40,000 Accumulated retained earnings 168,998 19,318 S 188,316 Total $208,998 $19,318 S $228,316 Total liabilities and owners' equity $295,432 $29,087 S $324,519 The firm used $29,087 in cash to acquire new assets. It raised this amount of cash by increasing liabilities and owners’ equity by $29,087. In particular, the needed funds were raised by internal financing (on a net basis), out of the additions to retained earnings, an increase in current liabilities, and by an issue of long-term debt.
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B-22 SOLUTIONS 17. a. Current ratio = Current assets / Current liabilities Current ratio 2008 = $68,726 / $61,434 = 1.12 times
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Business Finance Answers_Part_6 - CHAPTER 3 B-21 The...

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