Question

Comparative financial statement data for Cullumber Corporation and Ivanhoe Corporation, two competitors, appear below. All balance sheet data are as of December 31, 2022.

		Cullumber Corporation			Ivanhoe Corporation
		2022			2022
Net sales		$1,845,000			$610,000
Cost of goods sold		1,220,000			365,000
Operating expenses		308,000			94,000
Interest expense		9,000			3,600
Income tax expense		90,000			36,400
Current assets		427,000			131,600
Plant assets (net)		533,000			141,400
Current liabilities		57,640			35,344
Long-term liabilities		147,800			29,630
Additional Information:
Cash from operating activities		$153,000			$43,300
Capital expenditures		$92,500			$20,300
Dividends paid		$34,800			$15,100
Average number of shares outstanding		100,000			50,000

Can you explain ( Cullumber Corporation -Net Income , Earning per share ... Ivanhoe Corporation - Net Income , Earning per share ??)

Also explain ( each company - Debt to total assets ratio % , Free cash flow??)

Thank you!

Answer 1

Answer :-

Cullumber Corporation :-

1. Net Income = Net sales - cost of goods sold - operating expenses - interest expense - income tax expense

Net Income = $1,845,000 - $1,220,000 - $308,000 - $9,000 - $90,000

Net Income = $218,000

2. Earning Per Share = Net Income / Average no.of share outstanding

Earning Per Share = $218,000 / 100,000

Earning Per Share = $2.18

3. Debt to total assets ratio = Total Debt / Total Assets

Debt to Total assets ratio = ($57,640 + $147,800) /($427,000 + $533,000)

Debt to total assets Ratio = $205,440 / $960,000

Debt to Total assets Ratio = 21.4%

4. Free Cash Flow = Cash flow from operating activities - Capital Expenditures - Dividend Paid

Free Cash Flow = $153,000 - $92,500 - $34,800

Free Cash Flow = $25,700

- Ivanhoe Corporation:-

1. Net Income = Net sales - cost of goods sold - operating expenses - interest expense- income tax expense

Net Income = $610,000 - $365,000 - $94,000 - $3,600 - $36,400

Net Income = $111,000

2. Earning Per Share = Net Income / Average no.of share outstanding

Earning Per Share = $111,000 / 50,000

Earning Per Share = $2.22

3. Debt to Total assets Ratio = Total Debt / Total Assets

Debt to Total assets Ratio = ($35,344 + $29,630) /($131,600 + $141,400)

Debt to Total assets Ratio = $64,974 / $273,000

Debt to Total assets Ratio = 23.8%

4. Free Cash Flow = Net Cash flows from operating activities- Capital Expenditures- Dividend Paid

Free Cash Flow = $43,300 - $20,300 - $15,100

Free Cash Flow = $7,900

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