Financial Analysis of Farwell Company and Petrisin Company
Explore the income statements and balance sheets of Farwell Company and Petrisin Company to analyze their financial performance. Discover key financial metrics, such as net income, gross margin, operating expenses, and more, to gain insights into the financial health of these companies.
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M1 - TRAINING Income Statement Farwell Company has the following information available from its most recent fiscal year. Use the relevant information to determine the net income (loss) for the period. Cash sales, $40,000 Employee salary expense, $30,000 Common stock issued for cash, $100,000 Sales on account, $58,000 Utility expense, $1,500 Long-term loan received, $50,000 Interest earned on investments, $100 Property tax expense, $10,000 Inventory purchased for resale, $120,000 Cost of inventory sold, $102,000 Insurance purchased for the next year, $4,800 Rent expense, $12,000 Revenues: Cash Sales Sales on Account Total Revenue Expenses: COGS Empl salary expense 30,000 Utility expense Property tax expense 10,000 Rent expense Total Operating Expenses Operating Income Interest Income Net Income (Loss) $40,000 $58,000 $98,000 102,000 1,500 12,000 $155,500 ($57,500) 100 ($57,400)
M1 - TRAINING Financial Analysis (P2.7 pg.60) Petrisin Company Comparative Balance Sheet December 31, 2014 and 2013 Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets Accounts payable Wages payable Taxes payable Bonds payable Common stock Retained earnings Total liabilities and shareholder s equity _________________________________________________________________________________ Petrisin Company Income Statement For the Year Ended December 31, 2014 Sales Cost of goods sold Gross margin Operating expenses: Selling expense Rent expense Depreciation expense Bad debt expense Interest expense Income from operations Loss on sale of equipment Income before taxes Income tax expense Net income Cash 2014 2013 $ 24,200 45,650 79,200 316,800 (88,000) $377,850 $ 26,400 3,850 7,425 110,000 88,000 142,175 $377,850 $ 20,000 39,000 64,000 265,000 (72,000) $316,000 $ 37,000 4,000 8,500 100,000 80,000 86,500 $316,000 (Cash + Short-term investments + Receivables) / Current liabilities ($24,200+ $45,650) / ($26,400+ $3,850+ 7,425) = 1.85 $69,850 / $37,675 = 1.85 $400,000 231,750 $ 168,250 $39,000 45,000 11,000 1,715 15,000 111,715 $ 56,535 (2,000) $ 54,535 11,785 $ 42,750
M1 - TRAINING Financial Analysis Petrisin Company Comparative Balance Sheet December 31, 2014 and 2013 Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets Accounts payable Wages payable Taxes payable Bonds payable Common stock Retained earnings Total liabilities and shareholder s equity _________________________________________________________________________________ Petrisin Company Income Statement For the Year Ended December 31, 2014 Sales Cost of goods sold Gross margin Operating expenses: Selling expense Rent expense Depreciation expense Bad debt expense Interest expense Income from operations Loss on sale of equipment Income before taxes Income tax expense Net income Cash 2014 2013 $ 24,200 45,650 79,200 316,800 (88,000) $377,850 $ 26,400 3,850 7,425 110,000 88,000 142,175 $377,850 $ 20,000 39,000 64,000 265,000 (72,000) $316,000 $ 37,000 4,000 8,500 100,000 80,000 86,500 $316,000 Current assets / Current liabilities ($24,200 + $45,650 + $79,200) / ($26,400 + $3,850 + 7,425) = 3.96 $149,050 / $37,650 = 3.96 $400,000 231,750 $ 168,250 $39,000 45,000 11,000 1,715 15,000 111,715 $ 56,535 (2,000) $ 54,535 11,785 $ 42,750
M1 - TRAINING Financial Analysis Petrisin Company Comparative Balance Sheet December 31, 2014 and 2013 Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets Accounts payable Wages payable Taxes payable Bonds payable Common stock Retained earnings Total liabilities and shareholder s equity _________________________________________________________________________________ Petrisin Company Income Statement For the Year Ended December 31, 2014 Sales Cost of goods sold Gross margin Operating expenses: Selling expense Rent expense Depreciation expense Bad debt expense Interest expense Income from operations Loss on sale of equipment Income before taxes Income tax expense Net income Cash 2014 2013 $ 24,200 45,650 79,200 316,800 (88,000) $377,850 $ 26,400 3,850 7,425 110,000 88,000 142,175 $377,850 $ 20,000 39,000 64,000 265,000 (72,000) $316,000 $ 37,000 4,000 8,500 100,000 80,000 86,500 $316,000 $400,000 231,750 $ 168,250 Gross margin / Sales $168,250 / $400,00 = 42.06% $39,000 45,000 11,000 1,715 15,000 111,715 $ 56,535 (2,000) $ 54,535 11,785 $ 42,750
M1 - TRAINING Financial Analysis Petrisin Company Comparative Balance Sheet December 31, 2014 and 2013 Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets Accounts payable Wages payable Taxes payable Bonds payable Common stock Retained earnings Total liabilities and shareholder s equity _________________________________________________________________________________ Petrisin Company Income Statement For the Year Ended December 31, 2014 Sales Cost of goods sold Gross margin Operating expenses: Selling expense Rent expense Depreciation expense Bad debt expense Interest expense Income from operations Loss on sale of equipment Income before taxes Income tax expense Net income Cash 2014 2013 $ 24,200 45,650 79,200 316,800 (88,000) $377,850 $ 26,400 3,850 7,425 110,000 88,000 142,175 $377,850 $ 20,000 39,000 64,000 265,000 (72,000) $316,000 $ 37,000 4,000 8,500 100,000 80,000 86,500 $316,000 $400,000 231,750 $ 168,250 $39,000 45,000 11,000 1,715 15,000 Net income / Sales 111,715 $ 56,535 (2,000) $ 54,535 11,785 $ 42,750 $42,750 / $400,00 = 10.69%
M1 - TRAINING Financial Analysis Petrisin Company Comparative Balance Sheet December 31, 2014 and 2013 Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets Accounts payable Wages payable Taxes payable Bonds payable Common stock Retained earnings Total liabilities and shareholder s equity _________________________________________________________________________________ Petrisin Company Income Statement For the Year Ended December 31, 2014 Sales Cost of goods sold Gross margin Operating expenses: Selling expense Rent expense Depreciation expense Bad debt expense Interest expense Income from operations Loss on sale of equipment Income before taxes Income tax expense Net income Cash 2014 2013 $ 24,200 45,650 79,200 316,800 (88,000) $377,850 $ 26,400 3,850 7,425 110,000 88,000 142,175 $377,850 $ 20,000 39,000 64,000 265,000 (72,000) $316,000 $ 37,000 4,000 8,500 100,000 80,000 86,500 $316,000 Net income / Average total assets $400,000 231,750 $ 168,250 $42,750 / ([$316,00 + $377,850] / 2) = 12.32% $39,000 45,000 11,000 1,715 15,000 $42,750 / ($693,850 / 2) = 12.32% $42,750 / $346,925) = 12.32% 111,715 $ 56,535 (2,000) $ 54,535 11,785 $ 42,750
M1 - TRAINING Financial Analysis Petrisin Company Comparative Balance Sheet December 31, 2014 and 2013 Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets Accounts payable Wages payable Taxes payable Bonds payable Common stock Retained earnings Total liabilities and shareholder s equity _________________________________________________________________________________ Petrisin Company Income Statement For the Year Ended December 31, 2014 Sales Cost of goods sold Gross margin Operating expenses: Selling expense Rent expense Depreciation expense Bad debt expense Interest expense Income from operations Loss on sale of equipment Income before taxes Income tax expense Net income Cash 2014 2013 $ 24,200 45,650 79,200 316,800 (88,000) $377,850 $ 26,400 3,850 7,425 110,000 88,000 142,175 $377,850 $ 20,000 39,000 64,000 265,000 (72,000) $316,000 $ 37,000 4,000 8,500 100,000 80,000 86,500 $316,000 Net income / Average owners equity $42,750 / ([$80,00 + $86,500 + $88,00 + $142,175] / 2) = 21.55% $400,000 231,750 $ 168,250 $42,750 / ([$166,500 + $230,175] / 2) = 21.55% $39,000 45,000 11,000 1,715 15,000 $42,750 / ([$396,675] / 2) = 21.55% 111,715 $ 56,535 (2,000) $ 54,535 11,785 $ 42,750 $42,750 / $198,337.50 = 21.55%
M1 - TRAINING Financial Analysis Petrisin Company Comparative Balance Sheet December 31, 2014 and 2013 Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets Accounts payable Wages payable Taxes payable Bonds payable Common stock Retained earnings Total liabilities and shareholder s equity _________________________________________________________________________________ Petrisin Company Income Statement For the Year Ended December 31, 2014 Sales Cost of goods sold Gross margin Operating expenses: Selling expense Rent expense Depreciation expense Bad debt expense Interest expense Income from operations Loss on sale of equipment Income before taxes Income tax expense Net income Cash 2014 2013 $ 24,200 45,650 79,200 316,800 (88,000) $377,850 $ 26,400 3,850 7,425 110,000 88,000 142,175 $377,850 $ 20,000 39,000 64,000 265,000 (72,000) $316,000 $ 37,000 4,000 8,500 100,000 80,000 86,500 $316,000 Total debt / Total owners equity $400,000 231,750 $ 168,250 ($26,400 + $3,850 + $7,425 + $110,000) / ($88,000 + $142,175) = 64 to 1.00 $39,000 45,000 11,000 1,715 15,000 $147,675 / $230,175 = 64 to 1.00 111,715 $ 56,535 (2,000) $ 54,535 11,785 $ 42,750
M1 - TRAINING Financial Analysis Petrisin Company Comparative Balance Sheet December 31, 2014 and 2013 Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets Accounts payable Wages payable Taxes payable Bonds payable Common stock Retained earnings Total liabilities and shareholder s equity _________________________________________________________________________________ Petrisin Company Income Statement For the Year Ended December 31, 2014 Sales Cost of goods sold Gross margin Operating expenses: Selling expense Rent expense Depreciation expense Bad debt expense Interest expense Income from operations Loss on sale of equipment Income before taxes Income tax expense Net income Cash 2014 2013 $ 24,200 45,650 79,200 316,800 (88,000) $377,850 $ 26,400 3,850 7,425 110,000 88,000 142,175 $377,850 $ 20,000 39,000 64,000 265,000 (72,000) $316,000 $ 37,000 4,000 8,500 100,000 80,000 86,500 $316,000 Sales / Average accounts receivable $400,000 / ([$39,000 + $45,650] / 2) = 9.45 times $400,000 / ($84,650 / 2) = 9.45 times $400,000 / $42,325 = 9.45 times $400,000 231,750 $ 168,250 Days in the collection period: 356 / 9.45 = 38.62 days $39,000 45,000 11,000 1,715 15,000 111,715 $ 56,535 (2,000) $ 54,535 11,785 $ 42,750
M1 - TRAINING Financial Analysis Petrisin Company Comparative Balance Sheet December 31, 2014 and 2013 Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets Accounts payable Wages payable Taxes payable Bonds payable Common stock Retained earnings Total liabilities and shareholder s equity _________________________________________________________________________________ Petrisin Company Income Statement For the Year Ended December 31, 2014 Sales Cost of goods sold Gross margin Operating expenses: Selling expense Rent expense Depreciation expense Bad debt expense Interest expense Income from operations Loss on sale of equipment Income before taxes Income tax expense Net income Cash 2014 2013 $ 24,200 45,650 79,200 316,800 (88,000) $377,850 $ 26,400 3,850 7,425 110,000 88,000 142,175 $377,850 $ 20,000 39,000 64,000 265,000 (72,000) $316,000 $ 37,000 4,000 8,500 100,000 80,000 86,500 $316,000 Cost of sales / Average inventory $231,750 / ([$79,200 + $64,000] / 2) = 3.24 $231,750 / ($143,200 / 2) = 3.24 $231,750 / $71,600= 3.24 Days in the selling period: 356 / 3.24 = 112.65 days $400,000 231,750 $ 168,250 $39,000 45,000 11,000 1,715 15,000 111,715 $ 56,535 (2,000) $ 54,535 11,785 $ 42,750
M1 - TRAINING Financial Analysis Petrisin Company Comparative Balance Sheet December 31, 2014 and 2013 Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets Accounts payable Wages payable Taxes payable Bonds payable Common stock Retained earnings Total liabilities and shareholder s equity _________________________________________________________________________________ Petrisin Company Income Statement For the Year Ended December 31, 2014 Sales Cost of goods sold Gross margin Operating expenses: Selling expense Rent expense Depreciation expense Bad debt expense Interest expense Income from operations Loss on sale of equipment Income before taxes Income tax expense Net income Cash 2014 2013 $ 24,200 45,650 79,200 316,800 (88,000) $377,850 $ 26,400 3,850 7,425 110,000 88,000 142,175 $377,850 $ 20,000 39,000 64,000 265,000 (72,000) $316,000 $ 37,000 4,000 8,500 100,000 80,000 86,500 $316,000 Cost of goods sold / Average accounts payable $231,750 / ([$37,000+ 26,400 ]/ 2) = 7.31 times $231,750 / ($63,400 / 2) = 7.31 times $231,750 / $31,700 = 7.31 times $400,000 231,750 $ 168,250 Days in the collection period: 365 / 7.31 = 49.93 days $39,000 45,000 11,000 1,715 15,000 111,715 $ 56,535 (2,000) $ 54,535 11,785 $ 42,750
