SEU FIN500 Module 2: Financial Statements and Cash Flow Analysis

This assignment solution for FIN500, Principles of Finance, focuses on financial statement analysis and cash flow. It includes the preparation of an income statement and a balance sheet for Buraydah Manufacturing, Inc., along with common-sized financial statements to aid in comparative analysis. The solution also involves constructing a statement of cash flows, detailing cash flows from operating, investing, and financing activities. The assignment utilizes provided financial data, including revenues, expenses, assets, liabilities, and equity, to demonstrate a comprehensive understanding of financial reporting and analysis. All calculations and statements are presented in a clear and organized manner, reflecting a strong grasp of accounting principles and financial statement preparation. The solution demonstrates the ability to analyze financial performance and position using key financial statements.

Running Head: FINANCE
0
Principles of Finance
(Student Details: )
2/6/2020

FINANCE
1
FIN 500: Principles of Finance
Solution: Problem 2-1: Preparing Financial Statements
1. Income Statement and Common sized income statement
Buraydah Manufacturing, Inc.
Income
Statement
Common sized
Income
Statement
Revenues
Sales 5,826,000 100.00%
Cost of goods sold 2,672,000 45.86%
Gross profit 3,154,000 54.14%
Expenses
Interest expense 237,000 4.07%
Depreciation expense 422,000 7.24%
Income taxes 366,600 6.29%
Marketing, general and administrative expenses 1,678,500 28.81%
Dividends paid 120,000 2.06%
Total expenses 2,824,100 48.47%
Total profit 329,900 5.66%
2. End of Year Balance Sheet and Common sized balance sheet
Buraydah Manufacturing, Inc.
BALANCE SHEET
As of 31st December, 20XX
Assets
Particulars Balance Sheet Common sized
Balanced Sheet
Current assets
Cash 986,500 12.96%
Accounts receivable 395,000 5.19%
Inventories 967,000 12.70%
Total current assets 2,348,500 30.85%
Non-current assets
Fixed assets (property & equipment) 7,218,000 94.83%
Accumulated depreciation 2,817,000 37.01%
Net Assets 4,401,000
Other assets 862,000 11.32%
Total assets 7,611,500 100.00%

FINANCE
2
Liabilities
Short term notes payable 195,000 2.56%
Accounts payable 395,000 5.19%
0.00%
Total current liabilities 590,000 7.75%
Long term debt 5,844,000 76.78%
Other liabilities 0.00%
Total liabilities 6,434,000 84.53%
Stockholder's Equity
Common stock 428,000 5.62%
Retained earnings at beginning of year 419,600 5.51%
Add: Profits for the year 329,900
Total Stockholder's Equity 1,177,500 15.47%
Number of shares of common stock 1,000
Dividends paid 120,000 1.58%
Net working capital 1,758,500 23.10%
Total liabilities and shareholder equuity 7,611,500 100%
Debt ratio Total liabilities/total
assets
0.85
Solution: Problem 2-2: Preparing the Statement of Cash Flows
Cash flows from operating activities all amounts are in 000's SAR.
Decrease in accounts receivable -24
Increase in inventories -35
Operating income 80
Increase in accounts payable 25
Depreciation expense -12
Income taxes -17
Net cash provided by operating activities 17
Cash flows from investing activities
Increase in fixed assets -33
Net cash used in investing activities -33
Cash flows from financing activities
Dividends -15
Increase in common stock 22
Interest expense -25
Increase in long term debt 48
Net cash provided in financing activities 30
Beginning cash balance 20
Net change in cash and cash equivalents 14
Closing cash balance 34