22) Below is the balance sheet information on two companies. Prepare a common-si

Question

22) Below is the balance sheet information on two companies. Prepare a common-size balance sheet for each company. Review each company's percentage of total assets. Are these companies operating with similar philosophies or in similar industries? What appears to be the major difference in financing for these two c ompanies? Balance. Sheet Account Balance Sheet Com Co Current Assets Cash Investments Accts. Rec Invento Total Current Long Inv PP&E Goodwill Intangible Other Total Assets $4,146 $8,100 S5,372 $22,995 S84 $354 $221 $494 $1,368 $307 $1,471 $69 $27 $86 $5,390 $6,149 $3,799 $48,263 Liabilities Accts Short-Term D Other Short Lia Current Long-Term D Other Total 12,309 $1,139 SO SO $122 $2,955 $4,991 S4 $54 Owner's Equi Common Stock Treasury Stock Retained Earn. Total Equit S3,120 6,754 S30,503 $1,026 SO $1,461 $2,487 Total &Equit $48,263 $3,328

Explanation / Answer

Company 1 Company 2 Account amt % of total asset amt % of total asset Current asset cash 5377 11.1% 299 9.0% Investment 4146 8.6% 354 10.6% Acct rec 8100 16.8% 221 6.6% inventory 5372 11.1% 494 14.8% Total Current 22995 47.6% 1368 41.1% Long inv 84 0.2% 307 9.2% PP&E 9846 20.4% 1471 44.2% Goodwill 5390 11.2% 69 2.1% Intangible 6149 12.7% 27 0.8% Other 3799 7.9% 86 2.6% Total asset 48263 100.0% 3328 100.0% Liabilities Acct pay 12309 25.5% 661 19.9% Sort term debt 1139 2.4% 0 0.0% Other sort lia 0 0.0% 122 3.7% Current liab 13448 27.9% 783 23.5% Long-term debt 2955 6.1% 4 0.1% other liabilites 4991 10.3% 54 1.6% Total liabilites 21394 44.3% 841 25.3% Owners equity Common stock 3120 6.5% 1026 30.8% treasury stock -6754 -14.0% 0 0.0% retained earning 30503 63.2% 1461 43.9% Total equity 26869 55.7% 2487 74.7% Total liabilites & equity 48263 100.0% 3328 100.0% Analysis Asset Company 1 has higher current asset (more cash) compared to company 2. Company 2 has higher invested in fixed asset compard to company 1. Company 1 has more of goodwill and intangible represent capatilization of cost or acquisition done in past. Company 2 has very less component of these asset Liabilities : Company 1 is more financed thru debt while company 2 has equity compoenet. These two companies are not operating with similar philosophies or in similar industry Difference in financing. Company 1 has more debt compared to compnay 2. Long term debt for company 1 is 6% while company 2 is 0.1%. A part from long term debt current liabilites and other liabilites are also high for company 1. Company 1 is also applying treasury stock and there by has reduced its equity component. No such action being taken by compamy 2

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