Comprehensive Financial Analysis Comparative income statements and balance sheet
ID: 2475412 • Letter: C
Question
Comprehensive Financial Analysis Comparative income statements and balance sheets for Seneca Company follow for 2014 and 2013.
SENECA COMPANY
Comparative Income Statements
For Years Ended December 31, 2014 and 2013
2014 2013
Sales
$11,778,070
$11,241,498
Cost of Goods Sold
6,615,148
6,395,466
Gross Profit
5,162,922
4,846,032
Selling and administrative expenses
3,565,750
3,363,722
Operating income
1,597,172
1,482,310
Other expenses (revenues)
Interest revenue
(94,034)
(79,060)
Interest Expense
76,698
70,204
Total other expenses (revenues)
(17,336)
(8,856)
Income before income taxes
1,614,508
1,473,454
Income taxes
720,368
660,818
Net income
$894,140
$812,636
SENECA COMPANY
Comparative Balance Sheets
December 31, 2014 and 2013
2014 2013
Assets
Cash
$241,816
$259,370
Marketable securities
437,268
202,802
Accounts receivable
966,982
1,046,246
Inventory
1,501,438
1,620,470
Prepaid expenses
124,988
115,618
Total current assets
3,272,492
3,244,506
Investments and other investments
774,836
604,368
Property, plant and equipment, net
2,818,912
2,681,680
Trademarks and other intangibles
263,322
281,362
Total assets
$7,129,562
$6,811,916
SENECA COMPANY
Comparative Balance Sheets
December 31, 2014 and 2013
2014 2013
Liabilities and stockholders’ equity
Notes payable
$179,294
$175,174
Current maturities of long-term debt
10,030
15,056
Accounts payable and accrued expenses
1,822,326
1,932,930
Total current liabilities
2.011,650
2,123,160
Long-term debt
556,368
539,280
Total liabilities
2,568,018
2,662,440
Common stock
124,778
124,744
Additional paid- in capital
228,388
226,344
Retained earnings
4,208,378
3,798,388
Total Stockholders’ equity
4,561,544
4,149,476
Total liabilities and equity
$7,129,562
$6,811,916
Required
Prepare a comprehensive financial analysis of Seneca for 2014, including the following measures (round all calculations to three decimal places):
1.Short- term solvency ratios
2. Long-term solvency ratios
3. Performance measurement ratios
Comment on the financial condition of Seneca with respect to short term solvency, long term solvency and performance.
SENECA COMPANY
Comparative Income Statements
For Years Ended December 31, 2014 and 2013
2014 2013
Sales
$11,778,070
$11,241,498
Cost of Goods Sold
6,615,148
6,395,466
Gross Profit
5,162,922
4,846,032
Selling and administrative expenses
3,565,750
3,363,722
Operating income
1,597,172
1,482,310
Other expenses (revenues)
Interest revenue
(94,034)
(79,060)
Interest Expense
76,698
70,204
Total other expenses (revenues)
(17,336)
(8,856)
Income before income taxes
1,614,508
1,473,454
Income taxes
720,368
660,818
Net income
$894,140
$812,636
SENECA COMPANY
Comparative Balance Sheets
December 31, 2014 and 2013
2014 2013
Assets
Cash
$241,816
$259,370
Marketable securities
437,268
202,802
Accounts receivable
966,982
1,046,246
Inventory
1,501,438
1,620,470
Prepaid expenses
124,988
115,618
Total current assets
3,272,492
3,244,506
Investments and other investments
774,836
604,368
Property, plant and equipment, net
2,818,912
2,681,680
Trademarks and other intangibles
263,322
281,362
Total assets
$7,129,562
$6,811,916
SENECA COMPANY
Comparative Balance Sheets
December 31, 2014 and 2013
2014 2013
Liabilities and stockholders’ equity
Notes payable
$179,294
$175,174
Current maturities of long-term debt
10,030
15,056
Accounts payable and accrued expenses
1,822,326
1,932,930
Total current liabilities
2.011,650
2,123,160
Long-term debt
556,368
539,280
Total liabilities
2,568,018
2,662,440
Common stock
124,778
124,744
Additional paid- in capital
228,388
226,344
Retained earnings
4,208,378
3,798,388
Total Stockholders’ equity
4,561,544
4,149,476
Total liabilities and equity
$7,129,562
$6,811,916
Explanation / Answer
Answer:1 Short term solvency ratio:
Current ratio=Current Asset/Current liability
=3,272,492/2.011,650=1.627 times
Quick ratio=Quick Asset/Current liability
=(3,272,492-1,501,438-124988)/2.011,650=0.818 times
2. Long-term solvency ratios:
Solvency ratio=Net income+Dep/Short term liabilities+Long term liabilities
=$894,140/2,568,018=0.3482 times
3. Performance measurement ratios:
Net margin ratio=(894140/$11,778,070)*100=7.592%
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