Case 7-8 page 318
401(k)plan offers an opportunity for all full-time employees to participate by matching their contributions at a rate of 50% of employees up to the first 6% of employees’ compensation contributed to the plan.
The plan is recommendable as it provides a good employee contribution plan and also allows full-time employees to start contributing as early as possible. Secondly, the plan offers an investment opportunity for the employees.
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The best way to control pension expense is by investing the employees’ contributions to make a return. The returns from the investment provide cash to repay the pension plans that are due.
Case 10-1 page 423
Current ratio
Assets which are convertible into cash within a period of one year are Current assets . Examples include; Accounts receivables, cash, prepaid expenses, and inventory.
Current liabilities are obligations of a company which are supposed to be met within a period of one year. They include; tax payable, bonds payable, accounts payable and accrued liabilities.
current ratio = Current assets/current liabilities
Current ratio of the year 2010= $1,957,464/$471,168
=4.15
Current ratio of the year 2009=$1,022,941/$408,765
=2.05
Debt ratio
Debt ratio=Total debt/total assets
2010 debt ratio =$1,046,828/$2,209,953
= 0.36
2009 Debt ratio=$476,610/$1,834,224
=0.26
3. Total revenue
|
Years |
2008 ($) |
2009 ($) |
2010 ($) |
|
Calculations |
1,884,806/1,884,806*100 |
2,338,212/1,884,806*100 |
3,084,905/1,884,806*100 |
|
Total revenue |
100% |
124% |
164% |
Horizontal statement indicates a substantial increase in the revenues of the company
4. Gross profit
|
Years |
2008 ($) |
2009 ($) |
2010 ($) |
|
Calculations |
955,974/955,971*100 |
1,260,763/955,971*100 |
1,908,991/955,971*100 |
|
Gross profit |
100% |
132% |
200% |
As shown in the horizontal statement above, there was a substantial increase in the gross profit. It has increased by 200% in the year 2010
5. Net income
|
Years |
2008 ($) |
2009 ($) |
2010 ($) |
|
Calculations |
185,624/185,624*100 |
489,472/185,624*100 |
528,142/185,624*100 |
|
Net income |
100% |
267% |
284% |
There was a substantial increase in the net income of the company as shown in the horizontal statement. In the year 2010 net income increased by 284%
6. Per diluted common share
|
Years |
2008 ($) |
2009 ($) |
2010 ($) |
|
Calculations |
374,000/374,000*100 |
988,000/374,000*100 |
1,035,000/374,000*100 |
|
Per diluted common share |
100% |
264% |
277% |
There is a substantial increase in the per diluted common shares of the firm as shown in the horizontal statement. In the year 2010 per diluted common share increased by 277%.
7. Cash provided by operating activities
|
Years |
2008 ($) |
2009 ($) |
2010 ($) |
|
Calculations |
315,553/315,553*100 |
509,665/315,553*100 |
777,297/315,553*100 |
|
Cash provided by operating activities |
100% |
162% |
246% |
Cash provided by operating activities increased substantially as shown in the horizontal statement. cash operating activities increased by 246% in the year 2010.
8. Overall Analysis
increase in a current ratio up to 4.15 in 2010 shows that the liquidity position of the company is good.
Debt ratio increased to 0.36, this is an indication that the company increased its long-term liabilities.
the horizontal statement shows that the revenues of the company increased substantially.
Gross profit of the company increased substantially as indicated in the horizontal statement. It increased by 200% in the year 2010.
there was a substantial increase in net income of the company as shown in the horizontal statement. In the year 2010, net income increased by 284%.
per diluted common share increased substantially over the years. In the year 2010 per diluted share increased by 277%.
the horizontal statement indicates a substantial rise in the cash provided by operating activities of the firm.in the year 2010, it increased by 246%.
