Financial Management - Assignment Example

..13 References………………………………………………………………….14 Part I 1 Cash 60000 Common Stocks 60000 2 Cash 32000 Bank Loan 32000 3 Truck 12000 Notes payables 2000 Loan payables - truck 10000 4 Office equipment 6000 Cash 6000 5 Office equipment 400 Cash 400 6 Office equipment 3600 Cash 3600 7 Inventory 60000 Cash 60000 8 Cash 340000 Account Receivables 60000 Sales 400000 CGS 240000 Inventory 240000 9 Inventory 200000 Cash 200000 10 Advertising expenses 20000 Cash 20000 11 Rent expense 7200 Utilities expense 4800 Telephone expense 1200 Employee salaries 112000 Cash 125200 12 Loan 3333 Interest expense 699 Cash 4032 13 Loan 8000 Interest expense 4160 Cash 12160 Cash Common Stocks 60000 60000 32000 6000 Bank Loan 400 32000 3600 8000 60000 Bal.

24000 340000 200000 Loan payable – Truck 20000 10000 125200 3333 4032 Bal. 6667 12160 Truck Bal. 608 12000 Office Equipment Notes Payable 6000 2000 400 3600 Bal. 10000 Inventory 60000 Account receivables 240000 60000 200000 Bal. 20000 Advertising expenses 20000 Sales Utilities expense 400000 4800 Rent expense Employee salaries 7200 112000 Telephone expense Interest expense 1200 699 4160 Cost of goods sold Bal. 4859 240000 Projected Income Statement Revenues 400000 Cost of goods sold 240000 Gross Profit 160000 Expenses Interest expense 4859 Telephone expense 1200 Employee salaries 112000 Utilities expense 4800 Rent expense 7200 Advertising expense 20000 Total expenses 150059 Net Income 9941 Projected Balance Sheet Current Assets Cash 608 Account receivables 60000 Inventory 20000 Total current assets 80608 Equipment, machinery Truck 12000 Office equipment 10000 Total equipment, machinery 22000 Total Assets 102608 Liabilities & Stockholders equity Current liabilities Notes payable 2000 Long-term liability Bank Loan 24000 Loan payable – Truck 6667 Total liabilities 32667 Common stocks 60000 Retained earnings 9941 Total equity 102608 The projected income statement of Garden Place showed the company is going to have good profitability during the upcoming year.

The projected net income of the company is $9,941. The gross profit of the company is $160,000, while its gross margin is 40%. Gross margin is calculated dividing gross income by total sales. The gross margin is a measure of broad profitability (Garrison & Noreen, 2003). The net margin of the company is 2.48%. Net margin is a measure of the absolute profitability of the company. The net margin ratio is calculated dividing net income by total sales. The return on assets of Garden Place is projected to be 9.68%. Return on assets measures how profitable is a firm in relation to its assets (Investopedia, 2012).

The return on equity of Garden Place is projected by be 14.21%. “Return on equity reveals how much profit a company earned in comparison to the total amount of shareholder equity found on the balance sheet” (Kennon, 2012). The total assets of the firm are projected to reach $102,608, while its total equity is projected to be $69,941. The current ratio of the company is projected to be 40.34. The firm’s current ratio is outstanding considering the fact that a good current ratio is one that is above the 1.

0 threshold. The purpose of the current ratio is to demonstrate the ability of the company to pay off its short term debt (Investorwords, 2012). The formula to calculate current ratio is current assets divided by current liabilities. The debt