Bertha’s Bridal Boutique Financial Statement Analysis

1. Cash collected during 20x1 from accounts receivable

Beginning AR $ 625,000.00
Ending AR $ (692,000.00)
Net Credit Sales $ 7,200,000.00
Cash Collected 20x1 $ 7,133,000.00
2. Cash payments during 20x1 on accounts payable to suppliers
Cost of goods sold $ 4,320,000.00
Change in inventory $ 113,000.00
change in AP $ 52,000.00
Cash payments to suppliers $ 4,485,000.00

3. Calculate the cash provided from operations for 20x1.

Net Income $ 504,000.00
Depreciation $ 25,000.00
Changes in accrued expenses $ 6,000.00
Changes in prepaid expenses $ 20,000.00
Changes in AR $ (67,000.00)
Changes in Inventory $ (113,000.00)
Changes in AP $ (52,000.00)
Cash from operations $ 323,000.00

4. Calculate cash inflows during 20x1 from financing activities

Common Stock $ 100,000.00
Notes payable $ 750,000.00
Dividends Payable $ (50,000.00)
Inflows from financing activities $ 800,000.00

5. Calculate the cash outflows from investing activities during 20x1

Purchase of property $ (807,000.00)
change in long term investments $ (130,000.00)
Cash outflows from investment $ (937,000.00)

Analysis
 Financial statements can provide a great deal of information regarding the performance,

financially or otherwise, of a particular company.  The information provided in the financial

statements can be quite useful when major decisions are to be made regarding the company. 

Financial statements have, in fact, become quite an essential tool within business decision

making (Cepeda & Monteiro, 2020). Shareholders, investors, employees, etc. alike will use the

information within these financial statements when gathering information needed regarding an

organization for many different reasons. Some of the forms found within the financial

statements include the balance sheet and the income statement.

For Bertha’s Bridal Boutique, we are looking at the balance sheet as well as the income

statement for 20X1 and 20X0. Information supplied in the balance sheet and income statements

include Assets, liabilities and stockholders’ equity, stockholders’ equity, and finally the net

income. All of this information can be used to get a snap shot picture of how Bertha’s Bridal

Boutique performed in 20X1 versus 20X0.

In looking at the cash collected from accounts receivable in 20X1 for Bertha’s Bridal

Boutique we begin by taking the beginning accounts receivable, which is the same as the ending

accounts receivable from 20X0, and subtract the ending accounts receivable from 20X1 and

adding the net credit sales from 20X1. The result is a cash collected total of $7,133,000 for

20X1. Cash payments from accounts payable to suppliers in 20X1 were also calculated as part

of this analysis. To calculate the cash payments from accounts payable to suppliers we must first

take the costs of goods sold from 20X1 and add both the change in inventory from 20X0 to 20X1

as well as the change in accounts payable from 20X0 to 20X1. The resulting equation would be

$4,320,000 + $113,000 +$52,000 which comes to a total of cash payments from accounts

payable to suppliers of $4,485,000.

 Another factor in analyzing the balance sheet for Bertha’s Bridal Boutique is to look at

the cash provided from operations for 20X1. In order to calculate the cash from operations, we

need to look at the net income, depreciation, changes in accrued expenses, changes in prepaid

expenses, changes in accounts receivable, changes in inventory, and changes in accounts

payable. When we take the net income from 20X1 of $504,000 and add back in the difference of

depreciation of $25,000 as well as the changes in accrued expenses and prepaid expenses

between 20X0 and 20X1 and then adding in the changes in accounts receivable, of $(67,000),

changes in inventory of $(113,000) and finally the changes in accounts payable of $(52,000) that

brings us a total cash from operations of $323,000.

The final calculations that we are looking at in regards to the financial statements for

Bertha’s Bridal Boutique are the inflows from financing activities and outflows from

investments. To calculate the cash inflows from financing we start with the difference in

common stock between 20X0 and 20X1 of $100,000 and adding the notes payable of $750,000

and finally subtracting the dividends paid of $50,000 bringing the total of cash inflows from

financing activities to $800,000. To calculate the cash outflows from investments we take the

difference of property and equipment sold between 20X0 and 20X1 of $(807,000) and add the

change in long term investments of $(130,000) for a total of $(937,000).

This information provided within the balance sheet is a combination of both historical

and current costs used to provided an outside picture of how an organization is managing their

resources (Revsine, Collins, Johnson, Mittelstaedt, & Soffer, 2021). The details found within the

financial statements of Bertha’s Bridal Boutique may make the company more desirable to

investors as well as shareholders. This information will also be useful in the event the

organization looks to take part in a potential merger in the future.

Resources
Cepêda, C., & Monteiro, A. (2020). The Accountant’s Perception of the Usefulness of Financial

Information in Decision Making – A Study in Portugal. Review of Business Management, 22(2),

363-380. doi:10.7819/rbgn.v22i2.4050

Revsine, L., Collins, D. W., Johnson, W. B., Mittelstaedt, H. F., & Soffer, L. C. (2021). Financial

reporting & analysis. New York, NY: McGraw-Hill Education.