The balance sheet and income statement for webb enterprises inc. are

Assignment 2 Questions

 

Problem 6.7 Common Size Financial Statements

The balance sheet and income statement for Webb Enterprises Inc. are found below:

Balance Sheet

2010

Cash and Marketable Securities

$500

Accounts receivable

$6,000

Inventories

$9,500

           Current assets

$16,000

Net property plant & equipment

$17,000

           Total

$33,000

 

 

Accounts payable

$7,200

Short –term debt

$6,800

           Current liabilities

$14,000

Long-term Debt

$7,000

            Total liabilities

$21,000

            Total owner’s equity

$12,000

            Total liabilities and owners’ equity

$31,000

 

Income Statement

2010

Revenues

$30,000

Cost of goods sold

($20,000)

Gross profit

$10,000

Operating expenses

($8,000)

Net operating expenses

$2,000

Interest expense

($900)

Earnings before taxes

$1,100

Taxes

($400)

Net Income

$700

 

A .Prepare a common size balance sheet for Webb Ent

B. Prepare a common size income statement for Webb Ent

C. Use your common size financial statements to respond to your boss’ request that you write up your assessment of the firm’s financial condition. Specifically, write up a brief narrative that responds to the following questions:

a. How much cash does Webb have on hand relative to its total assets?

b. What proportion of Webb’s assets has the firm financed using short term debt?

c. What percent of Webb’s revenues does the firm have left over after paying all of its expenses (including taxes)?

d. Describe the relative importance of Webb’s major expense categories, including cost of goods sold, operating expenses, and interest expenses.

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