Please help me with this problem I do not want just the answer I need to know th

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Please help me with this problem I do not want just the answer I need to know the proceedure so I learn from it. Thank-you P 10-7 Arrowbell Company is a growing company. Two years ago, it decided to expand in order to increase its production capacity. The company anticipates that the expansion program can be completed in another two years. Financial information for Arrowbell is as follows. Arrowbell Company Sales and Net Income year sles Net Income 2007 2,568,660 145,800 2008 2,660,455 101,600 2009 2,550,180 52,650 2010 2,625,280 86,800 2011 3,680,650 151,490 Arrowbell Company Balance Sheet 12/31/2011 and 2010 2011 2010 Assets Current assets: Cash 250,480 260,155 Accounts receivable (net) 760,950 690,550 Inventories at lower-of-cost-or-market 725,318 628,238 Prepaid expenses 18,555 10,250 Total current assets 1,755,303 1,599,193 Plant and equipment: Land, buildings, machinery, and equipment 3,150,165 2,646,070 Less: Accumulated depreciation 650,180 525,650 Net plant and equipment 2,499,985 2,120,420 Other assets: Cash surrender value of life insurance 20,650 18,180 Other 40,660 38,918 Total other assets 61,310 57,098 Total assets 4,316,598 2,776,711 Liabilities and Stockholders%u2019 Equity Current liabilities: Notes and mortgages payable, current portion 915,180 550,155 Accounts payable and accrued liabilities 1,160,111 851,080 Total current liabilities 2,075,291 1,401,235 Long-term notes and mortgages payable, less current portion above 5,550,000 775,659 Total liabilities 2,625,291 2,176,894 Stockholders%u2019 equity: Capital stock, par value $1.00; authorized, 800,000; issued and outstanding, 600,000 (2011 and 2010) 600,000 600,000 Paid in excess of par 890,000 890,000 Retained earnings 201,307 109,817 Total stockholders%u2019 equity 1,691,07 1,599,817 Total liabilities and stockholders%u2019 equity 4,316,598 3,776,711 ARROWBELL COMPANY Statement of Cash Flows For Years Ended December 31, 2011 and 2010 2011 2010 Cash flows from operating activities: Net income 151,490 86,800 Noncash expenses, revenues, losses, and gains included in income: Depreciation 134,755 102,180 Increase in accounts receivable -70,400 -10,180 Increase in inventories -87,080 -15,349 Decrease in prepaid expenses in 2011, increase in 2010 1,695 -1,058 Increase in accounts payable and accrued liabilities 309,031 15,265 Net cash provided by operating activities 429,491 177,658 Cash flows from investing activities: Proceeds from retirement of property, plant, and equipment 10,115 3,865 Purchases of property, plant, and equipment -524,435 -218,650 Increase in cash surrender value of life insurance -2,470 -1,849 Other -1,742 -1,630 Net cash used for investing activities -518,532 -218,263 Cash flows from financing activities: Retirement of long-term debt -225,659 -50,000 Increase in notes and mortgages payable 365,025 159,155 Cash dividends -60,000 -60,000 Net cash provided by financing activities 79,366 49,155 Net increase (decrease) in cash $ -9,675 8,550 Required a. Comment on the short-term debt position, including computations of current ratio, acid-test ratio, cash ratio, and operating cash flow/current maturities of long-term debt and current notes payable. b. If you were a supplier to this company, what would you be concerned about? c. Comment on the long-term debt position, including computations of the debt ratio, debt/equity, debt to tangible net worth, and operating cash flow/total debt. Review the statement of operating cash flows. d. If you were a banker, what would you be concerned about if this company approached you for a long-term loan to continue its expansion program? e. What should management consider doing at this point with regard to the company%u2019s expansion program? Please help me with this problem I do not want just the answer I need to know the proceedure so I learn from it. Thank-you P 10-7 Arrowbell Company is a growing company. Two years ago, it decided to expand in order to increase its production capacity. The company anticipates that the expansion program can be completed in another two years. Financial information for Arrowbell is as follows. Arrowbell Company Sales and Net Income year sles Net Income 2007 2,568,660 145,800 2008 2,660,455 101,600 2009 2,550,180 52,650 2010 2,625,280 86,800 2011 3,680,650 151,490 Arrowbell Company Balance Sheet 12/31/2011 and 2010 2011 2010 Assets Current assets: Cash 250,480 260,155 Accounts receivable (net) 760,950 690,550 Inventories at lower-of-cost-or-market 725,318 628,238 Prepaid expenses 18,555 10,250 Total current assets 1,755,303 1,599,193 Plant and equipment: Land, buildings, machinery, and equipment 3,150,165 2,646,070 Less: Accumulated depreciation 650,180 525,650 Net plant and equipment 2,499,985 2,120,420 Other assets: Cash surrender value of life insurance 20,650 18,180 Other 40,660 38,918 Total other assets 61,310 57,098 Total assets 4,316,598 2,776,711 Liabilities and Stockholders%u2019 Equity Current liabilities: Notes and mortgages payable, current portion 915,180 550,155 Accounts payable and accrued liabilities 1,160,111 851,080 Total current liabilities 2,075,291 1,401,235 Long-term notes and mortgages payable, less current portion above 5,550,000 775,659 Total liabilities 2,625,291 2,176,894 Stockholders%u2019 equity: Capital stock, par value $1.00; authorized, 800,000; issued and outstanding, 600,000 (2011 and 2010) 600,000 600,000 Paid in excess of par 890,000 890,000 Retained earnings 201,307 109,817 Total stockholders%u2019 equity 1,691,07 1,599,817 Total liabilities and stockholders%u2019 equity 4,316,598 3,776,711 ARROWBELL COMPANY Statement of Cash Flows For Years Ended December 31, 2011 and 2010 2011 2010 Cash flows from operating activities: Net income 151,490 86,800 Noncash expenses, revenues, losses, and gains included in income: Depreciation 134,755 102,180 Increase in accounts receivable -70,400 -10,180 Increase in inventories -87,080 -15,349 Decrease in prepaid expenses in 2011, increase in 2010 1,695 -1,058 Increase in accounts payable and accrued liabilities 309,031 15,265 Net cash provided by operating activities 429,491 177,658 Cash flows from investing activities: Proceeds from retirement of property, plant, and equipment 10,115 3,865 Purchases of property, plant, and equipment -524,435 -218,650 Increase in cash surrender value of life insurance -2,470 -1,849 Other -1,742 -1,630 Net cash used for investing activities -518,532 -218,263 Cash flows from financing activities: Retirement of long-term debt -225,659 -50,000 Increase in notes and mortgages payable 365,025 159,155 Cash dividends -60,000 -60,000 Net cash provided by financing activities 79,366 49,155 Net increase (decrease) in cash $ -9,675 8,550 Required a. Comment on the short-term debt position, including computations of current ratio, acid-test ratio, cash ratio, and operating cash flow/current maturities of long-term debt and current notes payable. b. If you were a supplier to this company, what would you be concerned about? c. Comment on the long-term debt position, including computations of the debt ratio, debt/equity, debt to tangible net worth, and operating cash flow/total debt. Review the statement of operating cash flows. d. If you were a banker, what would you be concerned about if this company approached you for a long-term loan to continue its expansion program? e. What should management consider doing at this point with regard to the company%u2019s expansion program?

Explanation / Answer

2011 2010 Total Currrent Assets 1755303 1599193 total current liabilities 2075291 1401235 Current Ratio                0.85        1.14 Total C.Assets 1755303 1599193 Less: Inventory 725318 628238 Quick Assets 1029985 970955 Acid Test Ratio                0.50        0.69 Operating Cash flow 429491 177658 Current Maturities 915180 550155 Operating Cash flow/ Current Maturities                0.47        0.32 b. As as supplier, one is concerned about the current ratio & the liquidity position. c. Debt 5550000 775659 Equity 1691307 1599817 D/E Ratio                3.28        0.48

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