Compare the firms financial performance for 2006 and 2007

Assignment Help Financial Accounting

Reference no: EM131181987

SITUATION

The following financial statements are for the Cherokee communications corporation , the company provides pay phone service at many of the small convenience stores in the southwestern unilted states primary in texas and new mexico the business was meeting plan until 2007 when a problem developed

BALANCE SHEET
	2006	2007
ASSETS
Current assets:
Cash and cash equivalents	$ 668,778	$ 592,491
Accounts receivable	4,453,192	3,888,621
Inventories	137,036	112,699
Prepaid expenses and other current assets	411,990	407,274
Total current assets	$ 5,670,996	$ 5,001,085
Fixed assets:
Property, plant and equipment (net)	$12,935,453	$16,466,001
Site licenses	1,941,467	3,771,571
Investments in affiliates	164,549	251,672
Total fixed assets	$15,041,469	$20,489,244
Other assets	681,754	455,488
TOTAL ASSETS	$21,394,219	$25,945,817
DEBT (LIABILITIES) AND EQUITY
Current liabilities:
Notes payable	$ 2,151,371	S 3,320,197
Current portion of capital lease	1,094,381	668,826
Accounts payable	310,358	835,384
Accrued expenses	2,971,935	3,036,633
Income taxes payable	256,140	475,945
Total current liabilities	$ 6,784,185	S 8,336,985

Long-term liabilities:
Notes payable	$ 6,605,835	$10,030,963
Capital lease obligations	780,593	56,219
Deferred income taxes	342,359	306,021
Total long-term liabilities	$ 7,728,787	$10,393,203
Preferred stock	$ 2,400,000	$ 2,400,000
Common stockholders' equity:
Common stock	$ 1,438,903	$ 1,438,903
Additional paid-in capital	10,630	10,630
Retained earnings	3,031,714	3,366,096
Total ownership equity	$ 4,481,247	$ 4,815,629
TOTAL DEBT AND EQUITY	$21,394,219	525,945,817
Income Statements
	2006	2007
Sales revenue	$31,591,640	$34,910,951
Operating expenses:
Telephone charges	$ 7,851,842	$ 9,078,851
Commissions	4,909,445	5,627,288
Telecommunications fees	1,821,930	1,519,095
Depreciation	4,298,090	5,353,797
Field personnel	2,016,935	2,988,456
Chargebacks	1,104,896	1,111,857
General and administrative expenses	5,520,405	6,435,919
Total operating expenses	$27,523,543	$ 32,115,263
Operating Income	$ 4,068,097	$ 2,795,688
Interest expense
Other income
(expenses)	($1,631,416)	($1,816,222)
Interest income	57,278	5,069
Losses on affiliates	(34,608)	(108,556)
Unusual gains	1,160,238	27,234
Total other income
(expenses)	($448,508)	($1,892,475)
Income before taxes	$ 3,619,589	$ 903,213
Income taxes	1,399,140	424,831
Net income	$ 2,220,449	S 478,382

Question 1 : Using financial ratios, compare the firm's financial performance for 2006 and 2007.

Question 2 : What do you think might have happened from 2006 to 2007?

Reference no: EM131181987

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