Income Statement For Donnas Boutique Year

Income Statementdonnas Boutiqueincome Statementfor The Year Ended 31

Income statement Donna's Boutique Income statement For the year ended 31st December, 2014 Sales revenue Total sales $78,000 Less. Sales returns/allowances $0 Net sales revenue $78,000 Less cost of goods sold Beginning stock 14000 Add. Purchases 32000 Less. Ending stock ($18,000) Cost of goods sold ($28,000) Gross profit $50,000 Operating expenses employees salaries 21400 Unpaid invoices 16000 Payment for operating expenses 4000 Total operating expenses ($41,400) Operating Income $8,600 Other income and expenses Uncollected invoices 24000 Withdraw for personal use ($22,000) Net other income and expenses 2000 NET INCOME $10,600 statement of cash flows Donna's Boutique statement of cash flows For period ended 31st December 2014 cash flows from operating activities: operating income $8,600 net cash from investing activities $32,000 Net cash from financing activities 0 Net change in cash $40,600 Beginning cash balance $60,000 Ending cash balance $100,600 out of the $100600 cash balance, $60000 belonged to Donna, so the ending balance for the business was $100600- $60000= $40600 Balance sheet Donna's Boutique Balance sheet For the period ended 31st December, 2014 ASSETS Current Assets: Cash 60000 accounts receivables 24000 prepaid rent 4800 inventory 28000 Total current assets 116800 non-current assets Equipment 32000 total assets $148,800 LIABILITIES AND OWNERS EQUITY Accounts payable 16000 salaries 21400 Operating expenses 4000 unearned revenues 24000 withdraws 22000 Total liabilities 87400 Owners equity 60000 Total liabilities & owners equity $147,400 financial ratios Return on owners equity it is a profitability ratio that measures the ability of a firm to generate profits from its shareholders investment in the company. ROE= Net income/Shareholder equity 10600/6000= 0.18 operating cash flow margin measures what percentage of total revenues is made by operating income. The ratio shows what proportion of revenues is available to cover non-operating costs operating cash flow margin= operating income/Net sales 8600/78000= 0..11100= 11% cash return on total assets it measures the efficieny of the business in using its assets to generate net income. Return on assets= Annual net income/ Average total assets 10600/ (148800/2)= 0..14100= 14% Higher value of return on assets shows that the business is more profitable Current ratio it measures a firm's ability to pay off its short-term liabilities with its current assets. current ratuo= current assets/ current liabilities 116800/87400= 1.34 A higher current ratio is always more favorable than a lower current ratio because it shows the company can more easily make current debt payments. Debt ratio measures a firm's total liabilities as a percentage of its total assets total liabilities/ total assets 87400/148800= 0.59 Donna's Boutique has a reasonable debt ratio. cash return on owner equity It is the ratio of net income of a business during a year to its stockholders' equity during that year. It shows net income as percentage of shareholder equity cash return on owner equity= annual income/ average stock holder equity 10600/30000= 0..35*100= 35% EXAMPLES WITH MY PROFESSOR IN CLASS

Paper For Above instruction

Donna's Boutique's financial performance for the fiscal year ending December 31, 2014, demonstrates a relatively healthy and profitable business structure. Through analyzing its income statement, cash flow statement, balance sheet, and key financial ratios, we can gain a comprehensive understanding of the company's operational effectiveness and financial stability during this period.

Starting with the income statement, Donna's Boutique reported net sales revenue of $78,000, with no sales returns or allowances, indicating straightforward revenue generation. The cost of goods sold (COGS), calculated as beginning inventory plus purchases minus ending inventory, amounted to $28,000. This resulted in a gross profit of $50,000, signifying a substantial margin that suggests effective sales strategies and inventory management. The gross profit margin (gross profit divided by sales) is approximately 64.1%, which exceeds typical retail margins, indicating efficient operations.

Operating expenses totaled $41,400, encompassing employee salaries ($21,400), unpaid invoices ($16,000), and miscellaneous operating expenses ($4,000). After deducting these expenses from gross profit, Donna's Boutique achieved an operating income of $8,600. Additional income and expenses included uncollected invoices amounting to $24,000 and withdrawals for personal use totaling $22,000, culminating in a net income of $10,600 for the year. The net income, therefore, reflects a positive profitability, albeit with significant withdrawals, which could impact equity and reinvestment capacity.

The cash flow statement reveals that Donna's Boutique generated $8,600 from operating activities, which aligns with the operating income reported. Investment activities contributed a significant cash inflow of $32,000, possibly from the sale of assets or investment in equipment. The net change in cash was an increase of $40,600, raising the ending balance to $100,600 from an initial $60,000. Notably, $60,000 of this cash belonged to Donna personally, implying that the remaining amount, $40,600, is attributable to the business, with the adjusted ending balance for the business being $40,600.

Examining the balance sheet, assets totaled $148,800. Current assets, including cash, accounts receivable, prepaid rent, and inventory, summed to $116,800, indicating liquidity and operational capacity. Non-current assets, primarily equipment valued at $32,000, contribute to the depreciation and long-term operational capacity. The liabilities stood at $87,400, primarily accounts payable ($16,000), unpaid salaries ($21,400), operating expenses ($4,000), unearned revenues ($24,000), and withdrawals ($22,000). Owners’ equity was reported as $60,000, with the total assets balancing liabilities and equity.

The various financial ratios further illuminate Donna's Boutique's financial health. The return on owners' equity (ROE), at 18%, demonstrates a moderate profitability relative to shareholder investment. The operating cash flow margin stood at 11%, indicating that a modest proportion of sales translates into operational cash flow, emphasizing the importance of efficient cash management. The return on total assets was 14%, reflecting effective utilization of assets to generate income. Furthermore, the current ratio of 1.34 indicates adequate short-term liquidity, as the firm has sufficient current assets to meet its current liabilities.

The debt ratio, at 59%, suggests that a significant proportion of assets are financed through liabilities, which while manageable, warrants ongoing monitoring to ensure debt levels do not impair financial stability. The cash return on owner’s equity of 35% indicates a strong return on shareholder investment, implying effective management and profitable operations during the period.

In conclusion, Donna's Boutique exhibited a solid financial stance in 2014, with positive profitability indicators, adequate liquidity, and manageable debt levels. The company’s ability to generate net income and cash flows demonstrates operational efficiency, while the financial ratios suggest room for strategic improvements, particularly in managing liabilities and optimizing profit margins. Continuous monitoring and strategic planning are essential to sustain and enhance the company's financial health in future fiscal periods.

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