Working capital and liquidity ratios
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Assume that during the first year of a corporation's operation, there were numerous purchases of identical items of merchandise. However, there was no change during the year in the prices paid for this merchandise. Under these special circumstances, how would the financial statements be affected by the choice between the FIFO and LIFO methods of inventory valuation?
We discussed working capital and liquidity ratios. Based on your readings please
Briely comment about the solvency of the company below.
2010 2009 2008
Assets
Current Assets
Cash And Cash Equivalents 1,156,000 911,000 1,225,000
Short Term Investments 4,328,000 4,246,000 3,104,000
Net Receivables 738,000 768,000 811,000
Inventory 594,000 557,000 525,000
Other Current Assets 291,000 309,000 270,000
Total Current Assets 6,838,000 6,642,000 5,935,000
Long Term Investments - - -
Property Plant and Equipment 15,082,000 15,476,000 15,735,000
Goodwill - - -
Intangible Assets - - 1,109,000
Accumulated Amortization - - -
Other Assets 3,168,000 3,320,000 2,396,000
Deferred Long Term Asset Charges - - -
Total Assets 25,088,000 25,438,000 25,175,000
Liabilities
Current Liabilities
Accounts Payable 3,241,000 3,103,000 6,702,000
Short/Current Long Term Debt 1,883,000 1,194,000 2,672,000
Other Current Liabilities 3,656,000 3,431,000 -
Total Current Liabilities 8,780,000 7,728,000 9,374,000
Long Term Debt 9,253,000 10,583,000 9,001,000
Other Liabilities 10,730,000 10,344,000 9,438,000
Deferred Long Term Liability Charges 270,000 272,000 297,000
Minority Interest - - -
Negative Goodwill - - -
Total Liabilities 29,033,000 28,927,000 28,110,000
Stockholders' Equity
Misc Stocks Options Warrants - - -
Redeemable Preferred Stock - - -
Preferred Stock - - -
Common Stock 339,000 339,000 285,000
Retained Earnings (5,607,000) (5,136,000) (3,461,000)
Treasury Stock (367,000) (367,000) (367,000)
Capital Surplus 4,445,000 4,399,000 3,785,000
Other Stockholder Equity (2,755,000) (2,724,000) (3,177,000)
Total Stockholder Equity (3,945,000) (3,489,000) (2,935,000)
Net Tangible Assets (3,945,000) (3,489,000) (4,044,000)
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Solution discusses the working capital and liquidity ratios
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LIFO
Briely explain
Assume that during the first year of a corporation's operation, there were numerous purchases of identical items of merchandise. However, there was no change during the year in the prices paid for this merchandise. Under these special circumstances, how would the financial statements be affected by the choice between the FIFO and LIFO methods of inventory valuation?
INVENTORY is defined as the item which is used in the organization in the form of materials or they are ready for the sale purposes. LIFO, FIFO etc. are methods of inventory valuation. As there is no change in prices paid for the merchandize then all the methods of inventory valuation will give the same result. This is because inventory value has remained same as there is no change in prices.
We discussed working capital and liquidity ratios. Based on your readings please
Briefly comment about the solvency of the company below. ...
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