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    Accounting Case

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    Marianne Agunoy
    David Hartly, the new comptroller of Abington-Hill Toys, needs to help turn the company around from its past issues with lack of financial planning and crisis management. Hartly implemented new financial plans and his success will be shown through the company's financial statements for January 1992. The statements show the company has a net income of $5,600 for the month, with key financial ratios mostly in line with industry averages, indicating Hartly's plans have stabilized the company's financial condition.

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    Accounting Case

    Uploaded by

    Marianne Agunoy
    74 views4 pages
    David Hartly, the new comptroller of Abington-Hill Toys, needs to help turn the company around from its past issues with lack of financial planning and crisis management. Hartly implemented new financial plans and his success will be shown through the company's financial statements for January 1992. The statements show the company has a net income of $5,600 for the month, with key financial ratios mostly in line with industry averages, indicating Hartly's plans have stabilized the company's financial condition.

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    David Hartly, the new comptroller of Abington-Hill Toys, needs to help turn the company around from its past issues with lack of financial planning and crisis management. Hartly implemented new financial plans and his success will be shown through the company's financial statements for January 1992. The statements show the company has a net income of $5,600 for the month, with key financial ratios mostly in line with industry averages, indicating Hartly's plans have stabilized the company's financial condition.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    74 views4 pages

    Accounting Case

    Uploaded by

    Marianne Agunoy
    David Hartly, the new comptroller of Abington-Hill Toys, needs to help turn the company around from its past issues with lack of financial planning and crisis management. Hartly implemented new financial plans and his success will be shown through the company's financial statements for January 1992. The statements show the company has a net income of $5,600 for the month, with key financial ratios mostly in line with industry averages, indicating Hartly's plans have stabilized the company's financial condition.

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    ABINGTON-HILLS

    CASE 3
    FIN 103
    PRINCIPLES OF FINANCE

    UNICORN CLUB
    III BS LM

    GROUP: UNICORN CLUB


    David Hartly, now a newly hired company comptroller of Abington-Hill Toys has to face the
    fact that he needs to make his contribution in salvaging the life of the firm. Issues that AbingtonHill Toys had to take care of revolved around the lack of financial planning and a general crisisto-crisis pattern that was taking place in the firms operation in its recent years.
    With that, Hartly will now prove the success of the implementation of his plans through the
    currently financial condition of Abington-Hill Toys for the month of January, 1992.

    Balance Sheet
    January 31, 1992
    Assets
    Cash*
    Accounts Receivable
    Inventory
    Total Current Assets
    Plant and equipment
    Less: Allowance for depreciation
    Total fixed assets
    Total assets
    Liabilities and Net Worth
    Accounts payable
    Short term notes
    Accrued Expenses
    Total current liabilities
    Long-term debt
    Common stock, $10 par
    Retained Earnings**
    Total liabilities and net worth
    *balancing figure
    **assuming no dividends
    360/(Credit Sales/A/R) = 60
    A/R = 360/(720,000/A/R) = 60
    A/R = $ 120,000.00
    COGS/INV = 5
    90,000/INV = 5
    INV = $ 180,000.00

    $ 61,600.00
    120,000.00
    180,000.00
    $ 361,600.00
    1,340,000.00
    (500,000.00)
    $ 840,000.00
    $ 1,201,600.00
    $ 46,000.00
    30,000.00
    24,000.00
    $ 100,000.00
    386,000.00
    200,000.00
    515,600.00
    $ 1,201,600.00

    Sales
    Cost of goods sold
    Gross profit

    Income Statement
    For the month ended January 31, 1992
    $ 100,000.00
    (75,000.00)
    $ 25,000.00

    Operating expenses
    Variable cash operating expense
    Fixed cash operating expense
    Depreciation
    Total operating expenses

    7,000.00
    2,500.00
    5,000.00
    $(14,500.00)

    Net income before interest and taxes


    Interest

    10,500.00
    (2,500.00)

    Net income before taxes


    Taxes @ 30%

    $ 8,000.00
    (2,400.00)

    Net income

    $ 5,600.00
    Cash Budget
    From January 1, 1992-January 31, 1992

    Collections of A/R
    Cash received from sale of plant and
    equipment
    Cash received from long-term debt
    Total cash received

    $ 100,000.00
    75,000.00
    186,000.00
    $ 361,000.00

    Disbursements
    To suppliers
    For variable cash operating expense
    For fixed cash operating exepnse
    For interest
    For taxes
    For short term notes payable
    Total disbursements

    101,000.00
    7,000.00
    2,500.00
    2,500.00
    2,400.00
    194,000.00
    $ 309,400.00

    Net change in cash


    Add: beginning cash
    End cash

    51, 600.00
    10,000.00
    $ 61,600.00

    We have now come to conclusion that Hartlys proposed plan has succeeded because....
    We will now evaluate the financial condition of the firm through the employment of a
    ratio analysis of the firm versus the industry.
    Current Ratio
    Acid-test Ratio
    Average Collection Period
    Inventory Turnover
    Fixed Asset Turnover
    Total Asset Turnover
    Debt Ratio
    Time Interest Earned
    Gross Profit Margin
    Net Profit Margin
    Return on Assets
    Return on Equity

    Firm
    3.616x
    1.816x
    62 days
    5x
    1.43x
    1x
    40.45%
    4.2x
    25%
    5.6%
    5.6%
    9.4%

    Industry
    3.5x
    1.5x
    60 days
    5x
    1.43x
    1x
    45%
    4.1x
    25%
    8%
    8%
    14.55%

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