Question

The following are financial statements of Sheridan Company.

Sheridan Company Income Statement For the Year Ended December 31, 2022
Net sales		$2,210,500
Cost of goods sold		1,010,000
Selling and administrative expenses		900,000
Interest expense		81,000
Income tax expense		72,500
Net income		$ 147,000

Sheridan Company Balance Sheet December 31, 2022
Assets
Current assets
Cash		$ 64,700
Debt investments		90,000
Accounts receivable (net)		168,600
Inventory		242,200
Total current assets		565,500
Plant assets (net)		573,500
Total assets		$ 1,139,000
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable		$ 165,000
Income taxes payable		30,000
Total current liabilities		195,000
Bonds payable		215,040
Total liabilities		410,040
Stockholders’ equity
Common stock		347,000
Retained earnings		381,960
Total stockholders’ equity		728,960
Total liabilities and stockholders’ equity		$1,139,000

Additional information: The net cash provided by operating activities for 2022 was $193,000. The cash used for capital expenditures was $91,500. The cash used for dividends was $31,000. The weighted-average common shares outstanding during the year was 50,000.

(a)

Compute the following values and ratios for 2022. (We provide the results from 2021 for comparative purposes.) (Round Current Ratio and Earnings per share to 2 decimal places, e.g. 15.25 and Debt to assets ratio to 1 decimal place, e.g. 78.9%. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

(i)		Working capital. (2021: $160,500)
(ii)		Current ratio. (2021: 1.65:1)
(iii)		Free cash flow. (2021: $48,700)
(iv)		Debt to assets ratio. (2021: 31%)
(v)		Earnings per share. (2021: $3.15)

(i)		Working capital		$enter a dollar amount
(ii)		Current ratio		enter amount rounded to 2 decimal places	:1
(iii)		Free cash flow		$enter a dollar amount
(iv)		Debt to assets ratio		enter percentages rounded to 1 decimal place	%
(v)		Earnings per share		$enter a dollar amount rounded to 2 decimal places

Answer 1

i)	Working Capital		=	Current Assets - Current Liabilities
			=	$ 565500 - $ 195000
			=	$ 3,70,500.00

ii)	Current Ration		=	Current Assets / Current Liabilities
			=	$ 565500 / $ 195000
			=	2.90

iii)	Free Cash flow		=	Net cash provided by operating activities - Capital Expenditure - Cash Dividends
			=	$ 193000 - $ 91500 - $ 31000
			=	$ 70,500.00

iv)	Debt to Asset Ratio		=	Total Debts / Total Assets
			=	$ 410040 / $ 1139000
			=	36.0 %

v)	Earning per share		=	Earning available for ESH / Weighted-average common shares outstanding
			=	$ 147000 / 50000
			=	$      2.94