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Contemporary Wood Furniture Comparative Balance Sheet December 31, 2018
| 2010 | 2011 | The future is uncertain |
|---|---|---|
| Actual Assets | $29,649 | $23,279 |
| Cash | $3,278 | $1,844 |
| Received Accounts | $6,954 | $11,807 |
| Inventory | $17,417 | $9,628 |
| Get Plants and Equipment | $144,500 | $158,700 |
| Total Assets | $174,149 | $182,979 |
| Actual Liabilities | $13,010 | $18,220 |
| Accounts payable | $9,250 | $13,446 |
| Earnable Wages | $1,110 | $650 |
| Properties and taxes payable | $3,650 | $4,124 |
| Long-term debt | $75,800 | $92,800 |
| Owner’s Equity | $82,339 | $70,959 |
| Total Liabilities and Equity | $174,149 | $182,979 |
Horizontal analysis:
- Actual assets fell by 21.2%
- Cash declined by 43.5%
- Increase in accounts receivables by 69.6%
- Inventory declined by 44.7%
- Equipment and plants increased 9.7%
- Actual liabilities rose by 40%
- Increased accounts payable by 45.5%
- The wages payable have fallen by 41.2%
- Taxes and property dues increased by 13.1%
- The long-term debt rose by 22.1%
- Owner’s equity decreased by 13.7%
Current Ratio 2010: $29,649 / $13,010 = 2.28 Current Ratio 2011: $23,279 / $18,220 = 1.28
(2010) Total debt to total asset ratio = $13,010 + $75,800/ $174,149 = 0.58 (2011) Total debt and total assets ratio = $182,979/ 0.58
- The analysis shows the company has experienced a decline in assets and an increase of current liabilities. Cash balance and inventory both have declined significantly. There has been an increase in accounts receivable. The purchase of plant and equipment has slightly increased. The 2011 ratio is slightly lower than that of 2010. This could indicate difficulty in paying current liabilities. It has not changed in the ratio of total debt to assets, which means that debt levels have stayed constant. Charles rightly is concerned by these numbers. They indicate that liquidity issues may be a problem for the company in the short term. Charles should investigate the causes of these fluctuations in the balance sheets and make further inquiries.
