Exercise 17-10 Risk and capital structure analysis LO P3

Exercise 17-10 Risk and capital structure analysis LO P3

[The following information applies to the questions displayed below.]

Simon Company’s year-end balance sheets follow.

      

	At December 31			2014			2013			2012
	Assets
	Cash		$	37,119		$	41,704		$	43,016
	Accounts receivable, net			104,449			73,719			57,922
	Merchandise inventory			131,325			96,440			59,256
	Prepaid expenses			11,373			10,726			4,780
	Plant assets, net			326,549			303,976			265,226
	Total assets		$	610,815		$	526,565		$	430,200
	Liabilities and Equity
	Accounts payable		$	156,656		$	90,769		$	55,651
	Long-term notes payable secured by   mortgages on plant assets			112,537			123,532			95,074
	Common stock, $10 par value			162,500			162,500			162,500
	Retained earnings			179,122			149,764			116,975
	Total liabilities and equity		$	610,815		$	526,565		$	430,200

    

The company’s income statements for the years ended December 31, 2014 and 2013, follow.

    

For Year Ended December 31	2014						2013
Sales				$	794,060					$	626,612
Cost of goods sold	$	484,377					$	407,298
Other operating expenses		246,159						158,533
Interest expense		13,499						14,412
Income taxes		10,323						9,399
Total costs and expenses					754,358						589,642
Net income				$	39,702					$	36,970
Earnings per share				$	2.44					$	2.28

     

Calculate the company’s long-term risk and capital structure positions at the end of 2014 and 2013 by computing the following ratios. Explanation: Explanation: Debt-to-equity ratio     $269,193     2014: =  0.79 to 1   $341,622               $214,301     2013: =  0.69 to 1   $312,264     Explanation: Times interest earned     2014: ($39,702 + $10,323 + $13,499) / $13,499 = 4.7 times 2013: ($36,970 + $9,399 + $14,412) / $14,412 = 4.2 times

Simon Company's year-end balance sheets follow.

Exercise 17-7 Common-size percents LO P2

Simon Company's year-end balance sheets follow.

       

	At December 31			2014			2013			2012
	Assets
	Cash		$	25,498		$	30,106		$	32,314
	Accounts receivable, net			74,647			53,212			43,507
	Merchandise inventory			92,916			70,315			44,986
	Prepaid expenses			8,377			8,061			3,555
	Plant assets, net			235,093			214,626			195,638
	Total assets		$	436,531		$	376,320		$	320,000
	Liabilities and Equity
	Accounts payable		$	111,957		$	61,690		$	41,818
	Long-term notes payable secured by   mortgages on plant assets			80,426			85,688			72,842
	Common stock, $10 par value			163,500			163,500			163,500
	Retained earnings			80,648			65,442			41,840
	Total liabilities and equity		$	436,531		$	376,320		$	320,000

   

Express the balance sheets in common-size percents. (Do not round intermediate calculations and round your final answers to 1 decimal place.)

Exercise 17-3 Computation and analysis of trend percents LO P1

Exercise 17-3 Computation and analysis of trend percents LO P1

	2015	2014	2013	2012	2011
Sales	$ 611,060	$ 402,013	$ 321,610	$ 224,902	$ 161,800
Cost of goods sold	314,091	206,577	167,071	115,800	82,518
Accounts receivable	29,636	23,478	21,934	13,157	11,099

   

Compute trend percents for the above accounts, using 2011 as the base year.

The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:

The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:

Cash.

Net income.

Adjustments to net income.

Cash received from customers.

Increase (decrease) in accounts receivable.

Answer

Net income.

Retained earnings: Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception. All of the choices are correct. Are never adjusted for anything other than net income or dividends. Represent an amount of cash available to pay shareholders. Can only be appropriated by setting aside a cash fund.

Retained earnings:

Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception.

All of the choices are correct.

Are never adjusted for anything other than net income or dividends.

Represent an amount of cash available to pay shareholders.

Can only be appropriated by setting aside a cash fund.

Answer

Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception.