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    Maynard Company

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    Archin Padia
    The document analyzes the balance sheet of Maynard Company from the beginning to the end of June. It finds that there was a significant investment in equipment that increased production and sales. Accounts payable also increased as the company purchased more goods on credit instead of using available cash. The return on investment was very low at 5.03%. Key changes included increases in cash, equipment, and accounts receivable as well as increases in accounts payable, wages, bank notes, retained earnings, and taxes payable. In conclusion, raising current liabilities is not good for the company's future profits due to increased borrowing costs.

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    Maynard Company

    Uploaded by

    Archin Padia
    3K views2 pages
    The document analyzes the balance sheet of Maynard Company from the beginning to the end of June. It finds that there was a significant investment in equipment that increased production and sales. Accounts payable also increased as the company purchased more goods on credit instead of using available cash. The return on investment was very low at 5.03%. Key changes included increases in cash, equipment, and accounts receivable as well as increases in accounts payable, wages, bank notes, retained earnings, and taxes payable. In conclusion, raising current liabilities is not good for the company's future profits due to increased borrowing costs.

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    The document analyzes the balance sheet of Maynard Company from the beginning to the end of June. It finds that there was a significant investment in equipment that increased production and sales. Accounts payable also increased as the company purchased more goods on credit instead of using available cash. The return on investment was very low at 5.03%. Key changes included increases in cash, equipment, and accounts receivable as well as increases in accounts payable, wages, bank notes, retained earnings, and taxes payable. In conclusion, raising current liabilities is not good for the company's future profits due to increased borrowing costs.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    3K views2 pages

    Maynard Company

    Uploaded by

    Archin Padia
    The document analyzes the balance sheet of Maynard Company from the beginning to the end of June. It finds that there was a significant investment in equipment that increased production and sales. Accounts payable also increased as the company purchased more goods on credit instead of using available cash. The return on investment was very low at 5.03%. Key changes included increases in cash, equipment, and accounts receivable as well as increases in accounts payable, wages, bank notes, retained earnings, and taxes payable. In conclusion, raising current liabilities is not good for the company's future profits due to increased borrowing costs.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 2

    Maynard Company

    Synopsis of the case:-

    Ans.1- Findings by comparing the balance sheet of the end of June with start of June:-

    i).No investment on Building and Capital was made in the month of June.
    ii). Heavy investment of $23,400 on equipment, which increased the production and
    thereby increased the sales.
    iii). The A/c payables increased by $12,798, which means the company has purchased more
    goods on credit which increases the cost for the company, instead they could have used the
    surplus cash available of $66,660.
    iv). Return on Investment= Net Income/ Capital Employed
    which is= 19,635/3,90,000 = 5.03%
    which signifies a very low rate of return.
    v).Changes in assets and Liabilities:-

    Assets Increased:- Cash, Equipment & Accounts Receivable.


    Assets Decreased:- Inventory & Prepaid Insurance.
    Liabilities Increased:- Accounts Payable, Accrued Wages, Bank Notes, Retained Earnings
    and Tax Payable.

    Conclusion:- By analysing the balance sheet we can conclude that there was a significant
    increase in the cash balance, but it also raised the current liabilities, which is not good for a
    company because the cost of borrowings will affect the profit of the company in the future.

    Ans 2. There was an increase of only $7935 in retained earnings, although the profit
    increased by $19,635, this happened because from the net income $11,700 was paid as the
    dividend to Diane Maynard.

    Ans3. Amount in shareholder`s equity = Share Capital + Retained earnings.


    = $3,90,000 + $2,29,446 = $6,19,446

     The total shareholders fund amounts to $6,19,446, but apart from this the company
    has certain other liabilities which are to be paid off, the shareholders fund by the
    end of June is worth $6,19,446.

    Ans4. The change in cash balance was greater than net income because a). Various non cash
    expenses like depreciation is there, we follow accrual concept and expenditure on capital
    asset does not have effect on net income.

    Ans5. Cost of Sales:- Opening Stock+ Purchases- Closing Stock


    = 29835+14715+8517+12798-26520= 39345

    It would have been 14715 if there was no opening stock and closing stock left.

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