Financial Reports

Pickett Company

Balance Sheet

Assets

Cash

Accounts Receivable

Equipment (Net Depreciation)

Inventory

Total Assets

Liabilities

Accounts Payable

Long-term Debt

Total Liabilities

Stockholder's Equity

Common Stock

Paid In Capital

Retained Earnings

Total SE

Total SE & Liabilities

Pickett Company

Income Statement

Revenue

Cost of Goods Sold

Gross Income

Expenses

Depreciation Expense

Insurance Expense

Marketing

Miscellaneous Expense

Property Tax

Rent Expense

Salaries

Utilities

Total Expense

Net Income

Since the Inventory was an actual $75,000, Inventory, Retained Earnings, and Net Income was adjusted with a decrease of $3,650. Cost of Goods Sold was adjusted with an increase of $3,650. The customer's check of $10,000 adjusted cash with an increase of $10,000 and Accounts Receivable with a decrease of $10,000.

"A business that shows increased retained earnings balances is definitely making a profit because accounting income flows directly through the accumulated profit account." (Codjia). The net income is added to the retained earnings. Retained earnings increased the amount of net income. The company is making profit.

If "…money coming in exceeds the funds flowing out the door," there is a good chance of a good financial position. (Dahl, 2010). Assets do exceed liabilities by $330,000, which on a ratio basis, is 3.5 times more money in the business than money going out. This shows a good financial position. Net Income divided by Sales shows a 13.5% profit margin after all expenses are been paid. The business is generating a cash flow for a good cash position. In order to know a truer picture of the cash position, a tally over at least three months will show if the cash position is continually being improved over time. Tracking the cash position over time can reveal problems if fluctuations occur.

Bibliography

Codjia, M. (n.d.). How Can One Tell On the Balance Sheet If a Company Is Making a Profit? Retrieved from eHow Money: http://www.ehow.com/info_8101066_can-sheet-company-making-profit.html

Dahl, D. (2010, Aug 30). How to Evaluate Your Company's Financial Position. Retrieved from Inc.: http://www.inc.com/guides/2010/08/hot-to-evaluate-your-financial-position.html