Integrative Problem Presented here are a statement of income and retained earnings and comparative balance sheets for Gallagher, Inc., which operates a national chain of sporting goods stores. Gallagher, Inc. Statement of Income and Retained Earnings For the Year Ended December 31, 2016 (all amounts in thousands of dollars)
Net sales $48,000
Cost of goods sold 36,000
Gross profit $12,000
Selling, general, and administrative expense 6,000
Operating income $6,000
Interest expense 280
Income before tax $5,720
Income tax expense 2,280
Net income $3,440
Preferred dividends 100 Income available to common $3,340
Common dividends 500 To retained earnings $2,840
Retained earnings, 1/1 12,000
Retained earnings, 12/31 $14,840
Gallagher, Inc. Comparative Balance Sheets December 31, 2016 and 2015 (all amounts in thousands of dollars) December 31 2016 2015
Cash $840 $2,700
Accounts receivable 12,500 9,000
Inventory 8,000 5,500
Prepaid insurance 100 400
Total current assets $21,440 $17,600
Land $4,000 $4,000
Buildings and equipment 12,000 9,000
Accumulated depreciation (3,700) (3,000)
Total long-term assets $12,300 $10,000
Total assets $33,740 $27,600
Accounts payable $7,300 $5,000
Taxes payable 4,600 4,200
Notes payable 2,400 1,600
Current portion of bonds 200 200
Total current liabilities $14,500 $11,000
Bonds payable 1,400 1,600
Total liabilities $15,900 $12,600
Preferred stock, $5 par $1,000 $1,000
Common stock, $1 par 2,000 2,000
Retained earnings 14,840 12,000
Total stockholders’ equity $17,840 $15,000
Total liabilities and stockholders’ equity $33,740 $27,600
Required: 1. Prepare a statement of cash flows for Gallagher, Inc., for the year ended December 31, 2016, using the indirect method in the Operating Activities section of the statement. If an answer is zero, please enter zero ("0"). Use the minus sign to indicate cash outflows, a decrease in cash, or cash payments. Gallagher, Inc. Statement of Cash Flows For The Year Ended December 31, 2016 (In Thousands of Dollars)
Cash flows from operating activities $
Adjustments to reconcile net income to net cash provided by operating activities:
Net cash provided by operating activities $
Cash flows from investing activities $
Net cash used by investing activities $
Cash flows from financing activities $
Net cash provided by financing activities $
$
Cash balance, December 31, 2015
Cash balance, December 31, 2016 $
2. Gallagher's management is concerned with its short-term liquidity and its solvency over the long run. To help management evaluate these, compute the following ratios, rounding all answers to two decimal points. For percentages, round to two decimal places before converting to a percentage. For example, 0.881 would be entered as 88. Assume 360 days per year.
a. Current ratio to 1
b. Acid-test ratio to 1
c. Cash flow from operations to current liabilities ratio %
d. Accounts receivable turnover ratio times
e. Number of days' sales in receivables days
f. Inventory turnover ratio times
g. Number of days' sales in inventory days
h. Debt-to-equity ratio to 1
i. Debt service coverage ratio to 1
j. Cash flow from operations to capital expenditures ratio % 3.
