The Harrison Bicycle Company had the following operating results for 2021-2022. In addition, the company paid dividends in both 2021 and 2022 of $80,000 per year and made capital expenditures in both years of $230,000 per year. The company's stock price in 2021 was $14.20 and $12.50 in 2022. Also in 2022, the industry average earnings multiple for the bicycle industry was 8 and the free cash flow and sales multiples were 16 and 1.35, respectively. The company is publicly owned and has 1,400,000 shares of outstanding stock at the end of 2022. Balance Sheet, December 31, 2022 2021 Cash $ 267,000 $ 100,000 Accounts Receivable $ 525,000 $ 400,000 Inventory $ 450,000 $ 300,000 Total Current Assets $ 1,242,000 $ 800,000 Long-lived Assets 1,205,000 1,100,000 Total Assets $ 2,447,000 $ 1,900,000 Current Liabilities $ 500,000 $ 300,000 Long-term Debt 600,000 500,000 Shareholder Equity 1,347,000 1,100,000 Total Debt and Equity $ 2,447,000 $ 1,900,000 Income Statement, for year ended December 31, 2022 2021 Sales $ 6,250,000 $ 5,450,000 Cost of Sales 5,125,000 4,400,000 Gross Margin 1,125,000 1,050,000 Operating Expenses 580,000 550,000 Operating Income 545,000 500,000 Taxes 218,000 200,000 Net Income $ 327,000 $ 300,000 Cash Flow From Operations 2022 2021 Net Income $ 327,000 $ 300,000 Plus Depreciation Expense 125,000 125,000 + Decrease (-increase) in Accounts Receivable and Inventory (275,000) 0 + Increase (-decrease) in Current Liabilities 200,000 0 Cash Flow from Operations $ 377,000 $ 425,000 The book value of the company's equity for 2022 is: Multiple Choice $1,072,000 $1,347,000 $1,620,000 $2,520,000 $8,437,500
The Harrison Bicycle Company had the following operating results for 2021-2022. In addition, the company paid dividends in both 2021 and 2022 of $80,000 per year and made capital expenditures in both years of $230,000 per year. The company's stock price in 2021 was $14.20 and $12.50 in 2022. Also in 2022, the industry average earnings multiple for the bicycle industry was 8 and the free cash flow and sales multiples were 16 and 1.35, respectively. The company is publicly owned and has 1,400,000 shares of outstanding stock at the end of 2022. Balance Sheet, December 31, 2022 2021 Cash $ 267,000 $ 100,000 Accounts Receivable $ 525,000 $ 400,000 Inventory $ 450,000 $ 300,000 Total Current Assets $ 1,242,000 $ 800,000 Long-lived Assets 1,205,000 1,100,000 Total Assets $ 2,447,000 $ 1,900,000 Current Liabilities $ 500,000 $ 300,000 Long-term Debt 600,000 500,000 Shareholder Equity 1,347,000 1,100,000 Total Debt and Equity $ 2,447,000 $ 1,900,000 Income Statement, for year ended December 31, 2022 2021 Sales $ 6,250,000 $ 5,450,000 Cost of Sales 5,125,000 4,400,000 Gross Margin 1,125,000 1,050,000 Operating Expenses 580,000 550,000 Operating Income 545,000 500,000 Taxes 218,000 200,000 Net Income $ 327,000 $ 300,000 Cash Flow From Operations 2022 2021 Net Income $ 327,000 $ 300,000 Plus Depreciation Expense 125,000 125,000 + Decrease (-increase) in Accounts Receivable and Inventory (275,000) 0 + Increase (-decrease) in Current Liabilities 200,000 0 Cash Flow from Operations $ 377,000 $ 425,000 The book value of the company's equity for 2022 is: Multiple Choice $1,072,000 $1,347,000 $1,620,000 $2,520,000 $8,437,500
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The Harrison Bicycle Company had the following operating results for 2021-2022. In addition, the company paid dividends in both 2021 and 2022 of $80,000 per year and made capital expenditures in both years of $230,000 per year. The company's stock price in 2021 was $14.20 and $12.50 in 2022. Also in 2022, the industry average earnings multiple for the bicycle industry was 8 and the
| Balance Sheet, December 31, | ||
| 2022 | 2021 | |
|---|---|---|
| Cash | $ 267,000 | $ 100,000 |
| Accounts Receivable | $ 525,000 | $ 400,000 |
| Inventory | $ 450,000 | $ 300,000 |
| Total Current Assets | $ 1,242,000 | $ 800,000 |
| Long-lived Assets | 1,205,000 | 1,100,000 |
| Total Assets | $ 2,447,000 | $ 1,900,000 |
| Current Liabilities | $ 500,000 | $ 300,000 |
| Long-term Debt | 600,000 | 500,000 |
| Shareholder Equity | 1,347,000 | 1,100,000 |
| Total Debt and Equity | $ 2,447,000 | $ 1,900,000 |
| Income Statement, for year ended December 31, | ||
| 2022 | 2021 | |
|---|---|---|
| Sales | $ 6,250,000 | $ 5,450,000 |
| Cost of Sales | 5,125,000 | 4,400,000 |
| Gross Margin | 1,125,000 | 1,050,000 |
| Operating Expenses | 580,000 | 550,000 |
| Operating Income | 545,000 | 500,000 |
| Taxes | 218,000 | 200,000 |
| Net Income | $ 327,000 | $ 300,000 |
| Cash Flow From Operations | 2022 | 2021 |
|---|---|---|
| Net Income | $ 327,000 | $ 300,000 |
| Plus Depreciation Expense | 125,000 | 125,000 |
| + Decrease (-increase) in Accounts Receivable and Inventory | (275,000) | 0 |
| + Increase (-decrease) in Current Liabilities | 200,000 | 0 |
| Cash Flow from Operations | $ 377,000 | $ 425,000 |
The book value of the company's equity for 2022 is:
Multiple Choice
-
$1,072,000
-
$1,347,000
-
$1,620,000
-
$2,520,000
-
$8,437,500
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