Question

The comparative statements of Blossom Company are presented here. BLOSSOM COMPANY Income Statements For the Years Ended December 31 2022 2021 Net sales $1,512,400 $1,400,000 Cost of goods sold 847,000 804,800 Gross profit 665,400 595,200 Selling and administrative expenses 400,000 383,200 Income from operations 265,400 212,000 Other expenses and losses Interest expense 17,600 16,000 Income before income taxes 247,800 196,000 Income tax expense 74,340 58,800 Net income $ 173,460 $ 137,200 BLOSSOM COMPANY Balance Sheets December 31 Assets 2022 2021 Current assets Cash $ 48,080 $ 51,360 Debt investments (short-term) 59,200 40,000 Accounts receivable 94,240 82,240 Inventory 100,800 92,400 Total current assets 302,320 266,000 Plant assets (net) 519,200 416,240 Total assets $821,520 $682,240 Liabilities and Stockholders’ Equity Current liabilities Accounts payable $ 128,000 $116,320 Income taxes payable 34,800 33,600 Total current liabilities 162,800 149,920 Bonds payable 176,000 160,000 Total liabilities 338,800 309,920 Stockholders’ equity Common stock ($4 par) 232,000 240,000 Retained earnings 250,720 132,320 Total stockholders’ equity 482,720 372,320 Total liabilities and stockholders’ equity $821,520 $682,240 All sales were on account. Net cash provided by operating activities for 2022 was $176,000. Capital expenditures were $108,800, and cash dividends were $55,060. Compute the following ratios for 2022. (Round all answers to 2 decimal places, e.g. 1.83 or 1.83%.) (a) Earnings per share

b)		Return on common stockholders’ equity		enter return on common stockholders’ equity in percentages	%
(c)		Return on assets		enter return on assets in percentages	%
(d)		Current ratio		enter current ratio	:1
(e)		Accounts receivable turnover		enter accounts receivable turnover in times	times
(f)		Average collection period		enter average collection period in days	days
(g)		Inventory turnover		enter inventory turnover in times	times
(h)		Days in inventory		enter days in inventory	days
(i)		Times interest earned		enter times interest earned	times
(j)		Asset turnover		enter asset turnover in times	times
(k)		Debt to assets ratio		enter debt to assets ratio in percentages	%
(l)		Free cash flow		$enter free cash flow in dollars

Answer 1

ANSWER. INCOME STATEMENT OF BLOSSOM COMPANY

Items	2022	2021
Net sales	$1,512,400	$1,400,000
Less: cost of goods sold	$847,000	$804,800
Gross profit	$665,400	$595,200
Less: selling and administrative expenses	$400,000	$383,200
Income from operations	$265,400	$212,000
Less: interest expenses	$17,600	$16,000
Income before tax	$247,800	$196,000
Less: income tax expenses	$74,340	$58,800
Net income	$173,460	$137,200

balace shhet of blossom

Items	2022	2021
Assets
Cash	$48,080	$51,360
Debt instrument ( short term)	$59,200	$40,000
Account receivable	$94,240	$82,240
Inventory	$100,800	$92,400
Total current assets	$302,320	$266,000
Plant	$519,200	$416,240
Total assets	$821,520	$682,240
Liabilities and shareholders equity	-	-
Account payable	$128,000	$116,320
Income tax payable	$34,800	$33,600
Total current liabilities	$162,800	$149,920
Bonds payable	$176,000	$160,000
Total liabilities	$338,800	$309,920
Shareholders common stock	$232,000	$240,000
Retained earnings	$250,720	$132,320
Total equity	$482,720	$372,320
Total liabilities and equity	$821,520	$682,240

RATIOS:

1. EARNINGS PER SHARE = (NET INCOME OR EARNING AVAILABLE FOR EQUITY SHAREHOLDERS) / NO. OF ORDINARY SHARES

= 173,460 / 58,000 = 2.99 OR 3

NO. OF ORDINARY SHARES = COOMON STOCK / PAR VALUE PER SHARE = 232,000 / 4 = 58,000

2. RETURN ON COMMON SHAREHOLDER'S (EQUITY)= NET INCOME / EQUITY SHAREHOLDER'S FUND

= 173,460 / 482,720 = 35.93 %

EQUITY SHAREHOLDER'S FUND = COMMON STOCK + RETAINED EARNINGS

= 232,000 + 250,720 = 482,720

3. RETURN ON ASSETS = NET INCOME / AVERAGE TOTAL ASSETS

= 173,460 / 751,880 = 23.07%

TOTAL ASSETS FOR AVERAGE = ASSETS AT THE BEGINNIGS OF 2022 + ASSETS AT THE END OF 2022

= 682,240 + 821,520 = 1,503,760

AVERAGE OF TOTAL ASSETS = 1,503,760 / 2 = 751,880

4. CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES

= 302,320 / 162,800 = 1.85 : 1

5. ACCOUNT RECEIVABLE TURNOVER = NET SALES / AVERAGE ACCOUNT RECEIVABLES

= 1,512,400 / 88,240 = 17.13 TIMES

Accounts receivable = 94,240 + 82,240 = 176,480 AND AVERAGE = 176480 / 2 = 88,240

6. AVERAGE COLLECTION PERIOD = ( 1 / ACCOUNT REC. TURNOVER ) * 365 DAYS

= ( 1 / 17.13 ) * 365 DAYS = 21.30 OR 22 DAYS

7. INVENTORY TURNOVER = COST OF GOODS SOLD / AVERAGE INVENTORY

= 847,000 / 96,600 = 8.76 TIMES

AVERAGE INVENTORY = 100,800 + 92,400 = 193,200 / 2 = 96,600

8. DAYS IN INVENTORY = ( 1 / INVENTORY TURNOVER ) *365 DAYS

= 1 / 8.76 * 365 DAYS = 41.66 OR 42 DAYS

9. TIME INTEREST EARNED= EBIT( EARNINGS BEFORE TAX AND INTEREST ) / INTEREST EXPENSES

= 265,400 / 17,600 = 15.07 TIMES

10. ASSET TURNOVER RATIO = NET SALES / AVERAGE TOTAL ASSETS

= 1,512,400 / 751,880 = 2.01 TIMES

TOTAL ASSETS FOR AVERAGE = ASSETS AT THE BEGINNIGS OF 2022 + ASSETS AT THE END OF 2022

= 682,240 + 821,520 = 1,503,760

AVERAGE OF TOTAL ASSETS = 1,503,760 / 2 = 751,880

11. DEBT TO ASSET RATIO = TOTAL DEBT / TOTAL ASSET

= 176,000 / 821,520 = 21.42%

12. FREE CASH FLOW = CASH FLOW FROM OPERATING ACTIVITY - CAPITAL EXPENDITURE

= 176,000 - 108,800 = 67,200.