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Prepare a statement of cash flows for Gallagher, Inc., for the year ended December 31, 2017, using the indirect method in the Operating Activities section of the statement.

Presented here are a statement of income and retained earnings and comparative balance sheets for Gallagher, Inc., which operates a national chain of sporting goods stores. Gallagher, Inc. Statement of Income and Retained Earnings For the Year Ended December 31, 2017 (all amounts in thousands of dollars) Net sales ………………………………………………………………..$48,000 Cost of goods sold ………………………………………………………36,000 Gross profit …………………………………………………………….$12,000 Selling, general, and administrative expense ……………………………..6,000 Operating income ……………………………………………………….$ 6,000 Interest expense …………………………………………………………….280 Income before tax ………………………………………………………$ 5,720 Income tax expense ……………………………………………………….2,280 Net income ………………………………………………………………$ 3,440 Preferred dividends …………………………………………………………100 Income available to common ……………………………………………$ 3,340 Common dividends …………………………………………………………500 To retained earnings …………………………………………………….$ 2,840 Retained earnings, 1/1 ……………………………………………………12,000 Retained earnings, 12/31 ………………………………………………..$14,840 Required 1. Prepare a statement of cash flows for Gallagher, Inc., for the year ended December 31, 2017, using the indirect method in the Operating Activities section of the statement. 2. Gallagher’s management is concerned with its short-term liquidity and its solvency over the long run. To help management evaluate these, compute the following ratios, rounding all answers to the nearest one-tenth of a percent: a. Current ratio b. Acid-test ratio c. Cash flow from operations to current liabilities ratio d. Accounts receivable turnover ratio e. Number of days’ sales in receivables f. Inventory turnover ratio g. Number of days’ sales in inventory h. Debt-to-equity ratio i. Debt service coverage ratio j. Cash flow from operations to capital expenditures ratio 3. Comment on Gallagher’s liquidity and its solvency. What additional information do you need to fully evaluate the company? View Solution:
Presented here are a statement of income and retained earnings

 

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