AFM101 Midterm: AFM101 Midterm review.pdf

Business Decision Problem Crescent Paints, Inc., a paintmanufacturer, has been in business for

five years. The company has had modest profits and hasexperienced few operating difficulties

until this year, 2016, when president Alice Becknell discussedher company’s working capital

problems with you, a loan officer at Granite Bank. Becknellexplained that expanding her firm has

created difficulties in meeting obligations when they come dueand in taking advantage of cash

discounts offered by manufacturers for the timely payment of thecompany’s accounts payable.

She would like to borrow $50,000 from Granite Bank. At yourrequest, Becknell submits the fol-

lowing financial data for the past two years:

2016 2015

Sales revenue. . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . $2,000,000$1,750,000

Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . 1,320,000 1,170,000

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . 42,000 33,600

Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . 22,000 18,000

December 31, 2014, data. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . .

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . 1,100,000

Accounts receivable (net). . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . 205,000

Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . 350,000

CRESCENT PAINTS, INC.

Balance Sheets

Dec. 31, 2016 Dec. 31, 2015

Assets

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . $ 31,000 $ 50,000

Accounts receivable (net). . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 345,000 250,000

Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 525,000 425,000

Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 11,000

6,000

Total Current Assets . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 912,000 731,000

Plant assets (net) . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 483,000 444,000

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . $1,395,000 $ 1,175,000

CRESCENT PAINTS, INC.

Balance Sheets

Dec. 31, 2016 Dec. 31, 2015

Liabilities and Stockholders’ Equity

Notes payable—banks. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . $ 100,000 $ 35,000

Accounts payable. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 244,000 190,000

Accrued liabilities . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . 96,000

85,000

Total Current Liabilities. . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 440,000 310,000

10% Mortgage payable . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 190,000

250,000

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 630,000 560,000

Common stock. . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 665,000 535,000

Retained earnings . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . 100,000

80,000

Total Stockholders’ Equity . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 765,000 615,000

Total Liabilities and Stockholders’ Equity . . . . . . . . . . .. . . . . . . . . $1,395,000 $1,175,000

Calculate the following items for both years from the given dataand then compare them with the

median ratios for paint manufacturers provided by a commercialcredit firm:

Median Ratios for

Paint Manufacturers

1.

Current ratio . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . 2.5

2.

Quick ratio . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . 1.3

3.

Accounts receivable turnover. . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . 8.1

4.

Average collection period. . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 44.9 days

5.

Inventory turnover . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . 4.9

6.

Debt-to-equity ratio . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . 0.78

7.

Return on assets . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . 4.8%

8.

Return on sales . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . 2.4%

Calculate the following items for both years from the given dataand then compare them with the

median ratios for paint manufacturers provided by a commercialcredit firm:

Prepare a report on disclosure issues related to the segment and noncontrolling interest information for HP. I am not allowed to attach a website per this website my last post was flagged but any website containg this infomration is fine!! I am just having an issue talking about and understand their non controlling interests.

I'm not really sutre what infomrtaion is needed

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

Consolidated Balance Sheets

The accompanying notes are an integral part of these Consolidated Financial Statements.

76

Table of Contents

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

Consolidated Statements of Cash Flows

The accompanying notes are an integral part of these Consolidated Financial Statements.