60.1K

Verified Solution

Link Copied!

r each company $($Gilles$$ and Jacques$)$ create:

$1.$ Income Statement

$2.$ Balance Sheet

$3.$ Cash Flow Statement

Check Figures:

Jacques$$ Cupcake Bakery Gilles$$ Cupcake Bakery

Net Income $19,65032,700$

Total Assets $637,500132,700$

Total Liabilities $572,85025,000$

CFFO $58,6509,000$

CFFI $(62,000)(54,000)$

Based on the above $($and cash balances$),$ you should be able to infer Total Equity and CFFF$.$

I will provide you with the full solutions during class.

Reflection Questions

$1.$ Since Jacques received more cash from customers and has more cash in the bank, does that indicate he did better than Gilles?

$2.$ Gilles may not collect all of the cash he is owed. Jacques made significant long term asset purchases. How are these items likely to affect performance assessments?

$3.$ Compare performance using...

i$.$ Gross Margin $($Gross Profit $/$ Net Sales$)$

ii$.$ Profit Margin $($Net Income $/$ Net Sales$)$

iii. Asset Turnover $($Net Sales $/$ Average Total Assets$)$

iv$.$ Return on Assets $($Net Income $/$ Average Total Assets$)$

v$.$ Leverage $($Average Total Assets $/$ Average Stockholders$$ Equity$)$

vi$.$ Return on Equity $($Net Income $/$ Average Stockholders$$ Equity$)$

What does each comparison tell you about the companies$$ respective performance?

Check Figures:

Jacques$$ Cupcake Bakery Gilles$$ Cupcake Bakery

Gross Margin $31\mathrm{.}7\%18\mathrm{.}9\%$

Profit Margin $4\mathrm{.}8\%5\mathrm{.}4\%$

Asset Turnover $1\mathrm{.}289\mathrm{.}19$

Return on Assets $6\mathrm{.}16\%49\mathrm{.}28\%$

Leverage $9\mathrm{.}861\mathrm{.}46$

Return on Equity $60\mathrm{.}79\%60\mathrm{.}72\%$

Answer & Explanation Solved by verified expert

See Answer