Task 2

ABCFinancials1.xls

Balance Sheets

ABC, Inc.
Balance Sheets
(Amounts in Dollars)
	2014	2015	2014 % of Assets	2015 % of Assets	% Change
Assets
Current Assets
Cash and cash equivalents	$ 22,045	$ 10,867	2.18	0.87	(50.71)
Money market funds	31,510	16,000	3.12	1.27	(49.22)
Accounts receivable	301,713	425,755	29.90	33.90	41.11
Allowance for doubtful accounts	(31,916)	(33,779)	(3.16)	(2.69)	(5.84)
Inventory	307,701	503,091	30.49	40.06	63.50
Total Current Assets	631,053	921,934	62.54	73.41	46.09
Property and Equipment
Plant	500,000	500,000	49.55	39.81
Accumulated depreciation - plant	(220,000)	(240,000)	(21.80)	(19.11)	(9.09)
Equipment	120,000	120,000	11.89	9.55
Accumulated depreciation - equipment	(72,000)	(96,000)	(7.14)	(7.64)	(33.33)
Land	50,000	50,000	4.96	3.98	- 0
Net Property and Equipment	378,000	334,000	37.46	26.59	(11.64)
Total Assets	$ 1,009,053	$ 1,255,934	100.00	100.00	24.47
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable	145,031	387,757	14.37	30.87	167.36
Payroll taxes payable	8,524	17,436	0.84	1.39	104.55
Income taxes payable	30,235	4,125	3.00	0.33	(86.36)
Dividends payable	14,197	3,203	1.41	0.26	(77.44)
Total Current Liabilities	197,987	412,521	19.62	32.85	108.36
Notes payable	90,000	60,000	8.92	4.78	(33.33)
Total Long-term Liabilities	90,000	60,000	8.92	4.78	(33.33)
Stockholders' Equity
Capital stock	300,000	300,000	29.73	23.89
Paid-in capital	100,000	100,000	9.91	7.96
Retained earnings	321,066	383,413	31.82	30.53	19.42
Total Stockholders' Equity	721,066	783,413	71.46	62.38	8.65
Total Liabilities and Equity	$ 1,009,053	$ 1,255,934	100.00	100.00	24.47

ABC, Inc.
Income Statements
(Amounts in Dollars)
	2014	2015	2014 % of Sales	2015 % of Sales	% Change
Sales	$ 2,756,561	$ 3,307,873	100.00	100.00	20.00
Sales discounts	(8,371)	(9,207)	(0.30)	(0.28)	(9.99)
Sales returns	(33,809)	(51,559)	(1.23)	(1.56)	(52.50)
Bad debt expenses	(27,565)	(33,078)	(1.00)	(1.00)	(20.00)
Net Sales	2,686,816	3,214,029	97.47	97.16	19.62
Cost of goods sold	2,159,042	2,601,646	78.32	78.65	20.50
Gross margin	527,774	612,383	19.15	18.51	16.03
Salaries expense	259,287	290,400	9.41	8.78	12.00
Payroll tax expense	18,434	21,199	0.67	0.64	15.00
Fringe benefits	14,357	16,081	0.52	0.49	12.01
Rent	6,491	7,140	0.24	0.22	10.00
Utilities	21,943	25,673	0.80	0.78	17.00
Insurance	6,149	6,456	0.22	0.20	4.99
Supplies expense	3,067	3,650	0.11	0.11	19.01
Postage expense	974	1,140	0.04	0.03	17.04
Advertising expense	4,636	5,100	0.17	0.15	10.01
Professional fees	11,386	11,500	0.41	0.35	1.00
Miscellaneous	980	1,225	0.04	0.04	25.00
Purchase discounts lost	42,374	53,815	1.54	1.63	27.00
Interest expense	9,215	12,164	0.33	0.37	32.00
Depreciation expense	44,000	44,000	1.60	1.33	- 0
Total operating expenses	443,293	499,543	16.08	15.10	12.69
Operating Income	84,481	112,840	3.06	3.41	33.57
Interest revenue	22,864	28,580	0.83	0.86	25.00
Income before income taxes	107,345	141,420	3.89	4.28	31.74
Income taxes	25,114	37,508	0.91	1.13	49.35
Net Income	$ 82,231	$ 103,912	2.98	3.14	26.37
Beginning retained earnings	$ 271,728	$ 321,067
Net income	82,231	103,912
Dividends	(32,892)	(41,565)
Ending retained earnings	$ 321,067	$ 383,414

ABC, Inc.
Statement of Cash Flows
(Amounts in Dollars)
	2015	2015 % of Sales
Operating cash flows
Net income	$ 103,912	3.14
Depreciation	44,000	1.33
		- 0
Changes in working capital		- 0
(Increase) in accounts receivable	(122,179)	(3.69)
(Increase) in inventory	(195,390)	(5.91)
Increase in accounts payable	242,726	7.34
Increase in payroll taxes payable	8,912	0.27
(Decrease) in income taxes payable	(26,110)	(0.79)
(Decrease) in dividends payable	(10,994)	(0.33)
Cash flow from operations	44,877	1.36
Investing cash flows
Money market funds	15,510	0.47
Investing cash flows	15,510	0.47
Financing cash flows
Repayment of notes payable	(30,000)	(0.91)
Dividends	(41,565)	(1.26)
Financing cash flows	(71,565)	(2.16)
Net cash flow	(11,178)
Beginning cash	22,045
Ending cash	$ 10,867

ABC, Inc.
Ratios
(Amounts in Dollars)
	2014	2015
Operating Performance
Overall Performance
Return on Assets	8.1%	8.3%
Return on Equity	11.4%	13.3%
Asset Turnover	2.7	2.6
Cash Conversion Cycle
Days cash in receivables	40.0	47.0
Days cash in inventories	52.0	70.6
Days needs	92.0	117.6
Days cash in payables and accrued liabilities	23.0	50.8
Net conversion cycle	69.0	66.8
Financial Position
Short-term
Current Ratio	3.19	2.23
Quick Ratio	1.79	1.10
Dividend payout		92.6%
Long-term
Total debt to equity	0.40	0.60
Long-term debt to equity	0.12	0.08
Effective Tax Rate	23.4%	26.5%

Wholesale Heating and AC Industry
Comparative Balance Sheet Percentages
	12/31/14	12/31/15
	% of Assets	% of Assets
CASH AND EQUIVALENTS	5.00	4.50
ACCOUNTS RECEIVABLE (NET)	35.00	37.00
INVENTORY	40.00	39.00
OTHER CURRENT	1.50	1.40
TOTAL CURRENT ASSETS	81.50	81.90
FIXED ASSETS (NET)	17.50	17.00
INTANGIBLES (NET)	1.00	1.10
NON CURRENT ASSETS	18.50	18.10
TOTAL ASSETS	100.00	100.00
ACCOUNTS PAYABLE	28.50	30.50
SHORT TERM LOANS PAYABLE	13.50	14.00
INCOME TAXES PAYABLE	2.00	2.20
OTHER CURRENT	1.40	1.30
TOTAL CURRENT LIABILITIES	45.40	48.00
LONG-TERM DEBT	8.90	8.50
NET WORTH	45.70	43.50
TOTAL LIAB. AND NET WORTH	100.00	100.00
Comparative Income Statement Percentages
NET SALES	100.00	100.00
COST OF GOODS SOLD	79.00	79.50
GROSS MARGIN	21.00	20.50
TOTAL EXPENSES	16.50	17.00
INCOME BEFORE TAXES	4.50	3.50
ASSET TURNOVER	2.60	2.55
RETURN ON ASSETS	6.20%	5.90%
CURRENT RATIO	1.80	1.71
QUICK RATIO	0.88	0.86
TOTAL DEBT TO EQUITY	1.19	1.30
LONG-TERM DEBT TO EQUITY	0.19	0.20