Link Between Financial StatementsThe following information is available for a company. Income Statement (In ₹ million)Sales revenue2Operating expenses0.45 Operating profit 1.55 Interest expenses 0.22Taxes 0.28Net profit? Cash Flow Statement (In ₹ million)Cash in the beginning 0.75 Cash generated during the year?Cash at the end 1.52 Balance SheetAssetAmount (in ₹ million)Liability and equityAmount (in ₹ million)Fixed assets6Share capital5Cash? Profit for the year?Inventory2.53Owner’s equity? Long-term debt4 Total assets?Total liabilities and equity ? What is the total assets and owner’s equity? Total assets: ₹ 10.05 million; owner’s equity: ₹ 6.05 millionTotal assets: ₹ 15.52 million; owner’s equity: ₹ 6.52 millionTotal assets: ₹ 9.05 million; owner’s equity: ₹ 5.05 million
Question
Link Between Financial StatementsThe following information is available for a company. Income Statement (In ₹ million)Sales revenue2Operating expenses0.45 Operating profit 1.55 Interest expenses 0.22Taxes 0.28Net profit? Cash Flow Statement (In ₹ million)Cash in the beginning 0.75 Cash generated during the year?Cash at the end 1.52 Balance SheetAssetAmount (in ₹ million)Liability and equityAmount (in ₹ million)Fixed assets6Share capital5Cash? Profit for the year?Inventory2.53Owner’s equity? Long-term debt4 Total assets?Total liabilities and equity ? What is the total assets and owner’s equity? Total assets: ₹ 10.05 million; owner’s equity: ₹ 6.05 millionTotal assets: ₹ 15.52 million; owner’s equity: ₹ 6.52 millionTotal assets: ₹ 9.05 million; owner’s equity: ₹ 5.05 million
Solution
To answer this question, we first need to calculate the net profit from the income statement.
Net profit is calculated as follows: Operating profit - Interest expenses - Taxes = Net profit 1.55 - 0.22 - 0.28 = ₹ 1.05 million
Next, we calculate the cash generated during the year from the cash flow statement.
Cash generated during the year = Cash at the end - Cash in the beginning 1.52 - 0.75 = ₹ 0.77 million
Now, we can fill in the missing values in the balance sheet.
Cash = Cash generated during the year = ₹ 0.77 million Profit for the year = Net profit = ₹ 1.05 million
Total assets = Fixed assets + Cash + Inventory Total assets = 6 + 0.77 + 2.53 = ₹ 9.3 million
Owner’s equity = Share capital + Profit for the year Owner’s equity = 5 + 1.05 = ₹ 6.05 million
Total liabilities and equity = Long-term debt + Owner’s equity Total liabilities and equity = 4 + 6.05 = ₹ 10.05 million
So, the total assets are ₹ 9.3 million and the owner’s equity is ₹ 6.05 million. Therefore, none of the provided options are correct.
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