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Accounting Case

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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Marianne Agunoy
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83 views4 pages

Accounting Case

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.

Uploaded by

Marianne Agunoy
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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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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