CONARD CORPORATION

E14-3 

The comparative condensed balance sheets of Conard Corporation are presented below.

                                         CONARD CORPORATION

                                  Comparative Condensed Balance Sheets

                                               December 31

                                                                2012         2011

Assets

Current assets                                                 $ 74,000    $ 80,000

Property, plant, and equipment (net)                             99,000      90,000

Intangibles                                                      27,000      40,000

Total assets                                                   $200,000    $210,000

Liabilities and stockholders’ equity

Current liabilities                                            $ 42,000    $ 48,000

Long-term liabilities                                           143,000     150,000

Stockholders’ equity                                             15,000      12,000

Total liabilities and stockholders’ equity                     $200,000    $210,000

Instructions

(a) Prepare a horizontal analysis of the balance sheet data for Conard Corporation using 2011 as a base.

(b) Prepare a vertical analysis of the balance sheet data for Conard Corporation in columnar form for 2012.

E13-8 Here are comparative balance sheets for Taguchi Company.

                                       TAGUCHI COMPANY

                                    Comparative Balance Sheets

                                          December 31

Assets                                                        2011      2010

Cash                                                       $ 73,000  $ 22,000

Accounts receivable                                          85,000    76,000

Inventories                                                 170,000   189,000

Land                                                         75,000   100,000

Equipment                                                   260,000   200,000

Accumulated depreciation                                    (66,000)  (32,000) 

Total                                                      $597,000  $555,000

Liabilities and Stockholders’ Equity

Accounts payable                                           $ 39,000  $ 47,000

Bonds payable                                               150,000   200,000

Common stock ($1 par)                                       216,000   174,000

Retained earnings                                           192,000   134,000

Total                                                      $597,000  $555,000

Additional information:

1. Net income for 2011 was $103,000.

2. Cash dividends of $45,000 were declared and paid.

3. Bonds payable amounting to $50,000 were redeemed for cash $50,000.

4. Common stock was issued for $42,000 cash.

5. No equipment was sold during 2011, but land was sold at cost.

Instructions

Prepare a statement of cash flows for 2011 using the indirect method.

Access the information contained in Riordan Manufacturing’s balance sheet and income statement to calculate the following:

•Liquidity ratios

oCurrent ratio

oAcid-test, or quick, ratio

oReceivables turnover 

oInventory turnover

•Profitability ratios

oAsset turnover

oProfit margin

oReturn on assets

oReturn on common stockholders’ equity

•Solvency ratios

oDebt to total assets

oTimes interest earned

Show your calculations for each ratio.

Create a horizontal and vertical analysis for the balance sheet and the income statement.

Write a 350- to 700-word memo to the CEO of your selected organization in which you discuss your findings from your ratio calculations and your horizontal and vertical analysis. In your memo, address the following questions:

•What do the liquidity, profitability, and solvency ratios reveal about the         financial position of the company?

•Which users may be interested in each type of ratio?

•What does the collected data reveal about the performance and position of the         company?

                                  Riordan Manufacturing, Inc.

                                            Consolidated Balance Sheet

                                                          Fiscal Year Ending

                                                                 September 30th

                                                  2011     2010

                                      Assets

Current Assets

      Cash                                       $3,725,406    $2,807,029

      Accounts Receivable                        3,192,094     2,695,342

      Current Portion of Notes Receivable           84,255102,976

      Inventories                                9,709,611     8,517,203

      Prepaid Expenses and Other Items                  666,591402,240

Total Current Assets                              $17,377,957   $14,524,790

Notes Receivable, less current portion                 $842,551      $936,168

Investment in Joint Venture                        1,734,004     1,609,004

Property, Plant and Equipment - net               26,366,949    16,658,218

Intangible Assets - net                                  904,473904,473

Other Assets                                          183,203192,845

Total Assets                                       $47,409,137   $34,825,498

                          Liabilities and Stockholders' Equity

Current Liabilities

      Current Portion of Long-Term Debt                $1,560,959$474,032

      Accounts Payable                                 1,141,561     1,391,385

      Accrued Liabilities                           430,477 524,685

      Income Taxes Payable                           552,155 359,955

Total Current Liabilities                        $3,685,152    $2,750,057

Bank Line of Credit                                  $114,759$295,865

Long-Term Debt - less current portion                 9,500,741     1,006,955

Deferred Income Taxes - net                           660,503 825,629

Total Liabilities                                $13,961,155   $4,878,506

Common Stock

Stated par value is $.01.

20,000,000 shares authorized.

Issued and Outstanding 15,801,332 net of treasury shares.$29,055,488$29,055,488

Retained Earnings / (Accumulated Deficit)           4,392,494    891,504

Total Stockholders' Equity                         $33,447,982$29,946,992

Total Liabilities and Stockholders' Equity         $47,409,137$34,825,498

                                  Riordan Manufacturing, Inc.

                                      Income Statement

                            For the 12 months ending September 30th

                                                        2011   2010

Sales                                                   $66,608,660$56,534,254

Direct Cost of Goods Sold                            51,592,470 43,970,250

Gross Margin                                           $15,016,190$12,564,004

                                   Operating Expenses

Sales, Marketing & Other                            $1,328,615$ 1,265,348

Depreciation                                             1,378,616  1,152,125

Quality Assurance                                     1,151,176  1,112,247

Research & Development                                     1,039,637    962,627

General & Administrative                             4,954,751  4,674,293

Machining & Systems                                       143,808    125,050

Total Operating Expenses                            $9,996,603 $9,291,690

    Profit Before Interest & Taxes                    $5,019,587 $3,272,314

                                  Non-Operating Expenses

Interest Expense                                    $  604,616 $  121,533

Taxes                                                     1,104,309    719,909

   Total Non-Operating Expenses                            $1,708,925 $  841,442

        Net Profit After Taxes                            $3,310,662 $2,430,872