Problem 12 Your Answer Is Partially Correct Try Again

Problem 12 9ayour Answer Is Partially Correct Try Againcondensed Fi

Summarized financial data for Odgers Inc., including comparative balance sheets and income statements, has been provided, along with additional details about the company's activities during the year. Your task is to prepare a statement of cash flows using the indirect method, ensuring that amounts decreasing cash flow are shown with a minus sign or in parentheses. The data includes information on purchases and sales of plant assets, bond payoffs, dividends paid, and changes in working capital accounts. Additionally, you are to compute various financial ratios based on the data, such as earnings per share, return on equity, return on assets, current ratio, receivables turnover, inventory turnover, debt-to-assets ratio, and others, for the year 2014 with proper rounding. Moreover, analyze the company's financial performance by calculating percentage changes in net sales, net income, total assets, and stockholders’ equity from prior years. Lastly, the assignment requires analyzing cash flow components, including operational cash flows, investing activities, financing activities, and determining earnings per share, all based on the given financial statements of Hershey and Tootsie Roll Industries, among others.

Paper For Above instruction

The comprehensive analysis of Odgers Inc.’s financial statements and the preparation of its cash flow statement require an understanding of various accounting principles, including the indirect method for cash flows, and ratio calculations for performance assessment. This discussion provides an in-depth explanation of the required procedures and calculations, integrating relevant accounting theories and practical applications.

First, the preparation of the statement of cash flows using the indirect method involves adjusting net income for changes in working capital, non-cash expenses, and gains or losses. Odgers Inc. reported net income of $251,966 for 2014. Adjustments start with adding back depreciation expense of $75,795 and accounting for gains or losses on asset disposals. The sale of old plant assets incurred a loss of $12,224, which increases cash flow when adjusting net income. Additionally, changes in current assets and current liabilities, such as accounts receivable, inventory, prepaid expenses, accounts payable, and accrued expenses, significantly impact cash flows.

For example, an increase in accounts receivable represents cash outflow, as more sales are on credit. The provided data shows accounts receivable increased from $143,940 to $165,440, a change of $21,500, which decreases cash flow by that amount. Similarly, inventory increased by $27,712, decreasing cash by that amount. Prepaid expenses increased by $7,500, which reduces cash flow. On the liabilities side, an increase in accounts payable of $24,061 indicates a source of cash, as the company delayed payments. These adjustments are crucial for reconciling net income to cash flows from operating activities.

The investing activities include cash paid for the purchase of new plant assets totaling $188,000, offset by proceeds from the sale of plant assets, which provided $2,820 in cash. The net cash used for investing activities amounts to about $185,180, reflecting capital expenditure investments vital for maintaining or expanding the company's operations.

Financing activities involve transactions such as the repayment of bonds payable, issuance of lease financing agreements, dividends paid, and stock repurchases. For Odgers Inc., bond repayments minimized cash, while dividends of approximately $48,937 similarly decreased cash. The company also issued lease financing of $47,601, a financing inflow, which helps offset other outflows such as stock repurchases. These components provide a comprehensive picture of the company's financing strategies and liquidity management.

Calculations of financial ratios involve using data from the income statement and balance sheets. Earnings per share (EPS), for example, is derived by dividing net income by the weighted average number of common shares, which is pivotal for investor analysis. Return on equity (ROE) measures profitability relative to shareholders' equity, calculated as net income divided by average common stockholders’ equity. Return on assets (ROA) assesses overall efficiency by dividing net income by average total assets.

The current ratio evaluates short-term liquidity by dividing current assets by current liabilities. Accounts receivable turnover times indicate how many times receivables are collected annually, while the average collection period provides the days taken to collect receivables. Inventory turnover measures how rapidly inventory is sold, and days in inventory reflect the average holding period. The times interest earned ratio gauges the company's ability to service debt, and the debt to assets percentage indicates leverage levels, impacting risk assessments.

Furthermore, assessing changes in net sales and net income over time reveals growth or decline trends, while changes in total assets and stockholders’ equity indicate overall financial growth. Calculations such as percentage increase or decrease are performed using the formulas: ((current year - prior year)/prior year) * 100, providing insights into operational and financial performance.

For the Hershey and Tootsie Roll companies, analyzing their income statements and balance sheets helps calculate profitability ratios, liquidity ratios, and leverage ratios, facilitating comprehensive performance evaluations. The cash flow analysis, including net cash provided from operating activities, investing, and financing, as well as free cash flow calculations, helps understand the company's ability to generate cash, invest in growth, and return value to shareholders.

In conclusion, meticulous analysis and application of accounting principles to these financial data sets enable accurate statement preparation, ratio computation, and performance evaluation. These insights support strategic decision-making, investment analysis, and risk management, demonstrating the importance of comprehensive financial analysis based on credible and detailed data.

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