Managerial finance
perzianprince
as.xlsxTitle Sheet
Part 1
| Part 1 Financial Statements | |||||||||||
| B. Balance Sheet | |||||||||||
| A. Income Statement | 2017 | 2016 | |||||||||
| 2017 | 2016 | Assets | |||||||||
| Sales | $ 5,834,400.00 | $ 3,432,000.00 | Non-Current Assets | ||||||||
| Fixed Assets | $ 1,202,950.00 | $ 491,000.00 | |||||||||
| Cost of Good Sold | $ 4,980,000.00 | $ 2,864,000.00 | Accumulated Depreciation | $ 263,160.00 | $ 146,200.00 | ||||||
| Depreciation | $ 116,960.00 | $ 18,900.00 | Net Non-Current Assets | $ 939,790.00 | $ 344,800.00 | ||||||
| Other Expenses | $ 720,000.00 | $ 340,000.00 | Current Assets | ||||||||
| Total Expenses | $ 5,816,960.00 | $ 3,222,900.00 | Cash | $ 7,282.00 | $ 9,000.00 | ||||||
| EBIT | $ 17,440.00 | $ 209,100.00 | Accounts Receivable | $ 632,160.00 | $ 351,200.00 | ||||||
| Interest Expense | $ 176,000.00 | $ 62,500.00 | Inventory | $ 1,287,360.00 | $ 715,200.00 | ||||||
| EBT | $ (158,560.00) | $ 146,600.00 | Short Term Investments | $ 20,000.00 | $ 48,600.00 | ||||||
| Net Current Assets | $ 1,946,802.00 | $ 1,124,000.00 | |||||||||
| Tax | 40% | $ (63,424.00) | $ 58,640.00 | Total Assets | $ 2,886,592.00 | $ 1,468,800.00 | |||||
| Net Income/Loss | $ (95,136.00) | $ 87,960.00 | |||||||||
| Dividend | $ 11,000.00 | Equity & Liabilities | |||||||||
| Share Holder Equity | $ 460,000.00 | $ 460,000.00 | |||||||||
| Retained Earnings | $ 97,632.00 | $ 203,768.00 | |||||||||
| Total Equity | $ 557,632.00 | $ 663,768.00 | |||||||||
| Non Current Liability | |||||||||||
| Long Term Debt | $ 1,000,000.00 | $ 323,432.00 | |||||||||
| A. Statement of Retained Earnings | Current Liabilities | ||||||||||
| 2017 | Accounts Payable | $ 324,000.00 | $ 145,600.00 | ||||||||
| Balance at the end of 2016 | $ 203,768.00 | Notes Payable | $ 720,000.00 | $ 200,000.00 | |||||||
| Accruals | $ 284,960.00 | $ 136,000.00 | |||||||||
| Profit/Loss for the Year | $ (95,136.00) | Total Current Liabilities | $ 1,328,960.00 | $ 481,600.00 | |||||||
| Dividend at the end of the Year | $ (11,000.00) | Total Liabilities | $ 2,328,960.00 | $ 805,032.00 | |||||||
| Total Equity & Liabilities | $ 2,886,592.00 | $ 1,468,800.00 | |||||||||
| Balance of Retained Earnings at Year End | $ 97,632.00 | ||||||||||
| Statement of Shareholder Equity | |||||||||||
| Par Value of The Share | $ 4.60 | ||||||||||
| Net Outstanding Share | 100,000 | ||||||||||
| Net Share holder Equity | $ 460,000.00 | ||||||||||
| C. Common Size Balance Sheet | |||||||||||
| C. Common Size Income Statement | 2017 | 2016 | |||||||||
| 2017 | 2016 | Assets | |||||||||
| Sales | 100.00% | 100.00% | Non-Current Assets | ||||||||
| Fixed Assets | 41.67% | 33.43% | |||||||||
| Cost of Good Sold | 85.36% | 83.45% | Accumulated Depreciation | 9.12% | 9.95% | ||||||
| Depreciation | 2.00% | 0.55% | Net Non-Current Assets | 32.56% | 23.47% | ||||||
| Other Expenses | 12.34% | 9.91% | Current Assets | ||||||||
| Total Expenses | 99.70% | 93.91% | Cash | 0.25% | 0.61% | ||||||
| EBIT | 0.30% | 6.09% | Accounts Receivable | 21.90% | 23.91% | ||||||
| Interest Expense | 3.02% | 1.82% | Inventory | 44.60% | 48.69% | ||||||
| EBT | -2.72% | 4.27% | Short Term Investments | 0.69% | 3.31% | ||||||
| Tax | -1.09% | 1.71% | |||||||||
| Net Current Assets | 67.44% | 76.53% | |||||||||
| Net Income/Loss | -1.63% | 2.56% | Total Assets | 100.00% | 100.00% | ||||||
| Dividend | 0.19% | ||||||||||
| Equity & Liabilities | |||||||||||
| Share Holder Equity | 15.94% | 31.32% | |||||||||
| D. Statement of Cash Flow for 2017 | 2017 | Retained Earnings | 3.38% | 13.87% | |||||||
| Cash at the Beginning | $ 9,000.00 | Total Equity | 19.32% | 45.19% | |||||||
| Operating Activities | Non Current Liability | ||||||||||
| Net Income | $ (95,136.00) | Long Term Debt | 34.64% | 22.02% | |||||||
| Depreciation | $ 116,960.00 | Current Liabilities | |||||||||
| Change in Accounts Receivable | $ (280,960.00) | Accounts Payable | 11.22% | 9.91% | |||||||
| Change in Inventory | $ (572,160.00) | Notes Payable | 24.94% | 13.62% | |||||||
| Change in Accounts Payable | $ 178,400.00 | Accruals | 9.87% | 9.26% | |||||||
| Change in Accruals | $ 148,960.00 | Total Current Liabilities | 46.04% | 32.79% | |||||||
| Net Cash from operating Activities | $ (503,936.00) | Total Liabilities | 80.68% | 54.81% | |||||||
| Investing Activities | Total Equity & Liabilities | 100.00% | 100.00% | ||||||||
| Cash used to acquire Fixed Assets | $ (711,950.00) | ||||||||||
| Change in Short Term Investments | $ 28,600.00 | ||||||||||
| Net Cash from Investing Activities | $ (683,350.00) | ||||||||||
| Financing Activities | |||||||||||
| Change in Notes Payable | $ 520,000.00 | ||||||||||
| Change in Long Term Debt | $ 676,568.00 | ||||||||||
| Dividend Disbursement | $ (11,000.00) | ||||||||||
| Net Cash from Financing Activities | $ 1,185,568.00 | ||||||||||
| Net Cash Flow | $ (1,718.00) | ||||||||||
| Net Cash | $ 7,282.00 | ||||||||||
Part 2
| Part 2 | ||||||||||||
| A. Ratio Analysis | B. Comments on the Ratio Change from 2016 to 2017 | C. Retail Industry Ratio and Comparision | ||||||||||
| 2017 | 2016 | |||||||||||
| Current Ratio | Current Ratio has decreased so the company is less efficient its operations | Current Ratio of Retail Industry in 2017 was 1.24 - The Company is better at operational efficiency than industry standards | ||||||||||
| Cash | $ 7,282.00 | $ 9,000.00 | ||||||||||
| Accounts Receivable | $ 632,160.00 | $ 351,200.00 | ||||||||||
| Inventory | $ 1,287,360.00 | $ 715,200.00 | ||||||||||
| Short Term Investments | $ 20,000.00 | $ 48,600.00 | ||||||||||
| Total Current Assets | $ 1,946,802.00 | $ 1,124,000.00 | ||||||||||
| Accounts Payable | $ 324,000.00 | $ 145,600.00 | ||||||||||
| Notes Payable | $ 720,000.00 | $ 200,000.00 | ||||||||||
| Accruals | $ 284,960.00 | $ 136,000.00 | ||||||||||
| Total Current liabilities | $ 1,328,960.00 | $ 481,600.00 | ||||||||||
| Current Ratio | 1.46 | 2.33 | ||||||||||
| Quick Ratio | Quick Ratio has decreased so the company is less liquid (Increased risk) | Quick Ratio of Retail Industry in 2017 was 0.49 so the company is in par with industry standards | ||||||||||
| Cash | $ 7,282.00 | $ 9,000.00 | ||||||||||
| Accounts Receivable | $ 632,160.00 | $ 351,200.00 | ||||||||||
| Short Term Investments | $ 20,000.00 | $ 48,600.00 | ||||||||||
| Total Current Assets | $ 659,442.00 | $ 408,800.00 | ||||||||||
| Accounts Payable | $ 324,000.00 | $ 145,600.00 | ||||||||||
| Notes Payable | $ 720,000.00 | $ 200,000.00 | ||||||||||
| Accruals | $ 284,960.00 | $ 136,000.00 | ||||||||||
| Total Current liabilities | $ 1,328,960.00 | $ 481,600.00 | ||||||||||
| Quick Ratio | 0.50 | 0.85 | ||||||||||
| Inventory Turnover (Times) | Inventory Turnover has increased so the company has become more efficient in terms of inventory management | Inventory Turnover for Retail industry in 2017 was 4.5 so the company is in par with inventory tunrover | ||||||||||
| Cost of Goods Sold | $ 4,980,000.00 | $ 2,864,000.00 | ||||||||||
| Inventory | $ 1,287,360.00 | $ 715,200.00 | ||||||||||
| Average Inventory | $ 1,001,280.00 | $ 1,001,280.00 | ||||||||||
| Inventory Turnover | 4.97 | 2.86 | ||||||||||
| Average Collection Period (Days) | Average Collection days has increased hence the company has become less efficient in collecting on time | Receivable turnover for Retail Industry in 2017 was 5 days so the company is very bad on collections | ||||||||||
| Annual Sales | $ 5,834,400.00 | $ 3,432,000.00 | ||||||||||
| Daily Sales | $ 15,984.66 | $ 9,402.74 | ||||||||||
| Accounts Receivable | $ 632,160.00 | $ 351,200.00 | ||||||||||
| Average Collection Period | 39.55 | 37.35 | ||||||||||
| Total Asset Turnover (Times) | Total Asset Turnover has decreased hence the company is now less efficient in utilizig the assets | Asset Turnover for Retail Industry in 2017 was 4.5 so the company is bad at utilizing its resources. It has bought major resources that is yet to be realized | ||||||||||
| Annual Sales | $ 5,834,400.00 | $ 3,432,000.00 | ||||||||||
| Fixed Assets | $ 939,790.00 | $ 344,800.00 | ||||||||||
| Cash | $ 7,282.00 | $ 9,000.00 | ||||||||||
| Accounts Receivable | $ 632,160.00 | $ 351,200.00 | ||||||||||
| Inventory | $ 1,287,360.00 | $ 715,200.00 | ||||||||||
| Short Term Investments | $ 20,000.00 | $ 48,600.00 | ||||||||||
| Total Assets | $ 2,886,592.00 | $ 1,468,800.00 | ||||||||||
| Total Asset Turnover | 2.02 | 2.34 | ||||||||||
| Debt Ratio | Debt Ratio has significantly increased increasing risk of Bankruptcy | Debt Ratio of Retail Industry in 2017 was 0.67 so the company is overleveraged and risky | ||||||||||
| Total Liabilities | $ 2,328,960.00 | $ 805,032.00 | ||||||||||
| Total Assets | $ 2,886,592.00 | $ 1,468,800.00 | ||||||||||
| Debt Ratio | 0.81 | 0.55 | ||||||||||
| Total Interest Earned | The company's total interest earned has decreased below 1 so the company is no longer ready to pay its long term debt on time | Interest Coverage Ratio of Retail industry in 2017 was 2.84 company is in deep debt which might be non-recoverable | ||||||||||
| EBIT | $ 17,440.00 | $ 209,100.00 | ||||||||||
| Interest Expense | $ 176,000.00 | $ 62,500.00 | ||||||||||
| Total Interest Earned Ratio | 0.10 | 3.35 | ||||||||||
| Gross Profit Margin | Gross Profit Margin has decreased so the company is now less efficient in selling the goods manufactured | Gross margin in Retail industry in 2017 was around 32%. Company is not profitable | ||||||||||
| Sales (A) | $ 5,834,400.00 | $ 3,432,000.00 | ||||||||||
| Cost of Goods Sold (B) | $ 4,980,000.00 | $ 2,864,000.00 | ||||||||||
| Gross Profit Margin{(A) - (B)} / (A) | 14.64% | 16.55% | ||||||||||
| Net Profit Margin | Net Profit Margin has significantly decreased so the growth Rate has declined | Profit Margin in retail industry in 2017 was 2.2%. The company is in a financial turmoil | ||||||||||
| Sales | $ 5,834,400.00 | $ 3,432,000.00 | ||||||||||
| Net Profit | $ (95,136.00) | $ 87,960.00 | ||||||||||
| Net Profit Margin | -1.63% | 2.56% | ||||||||||
| P/E Ratio | Price to Earning Ratio has decreased significantly and has now gone negative. The company is not growing | P/E ratio has gone below 0 so the company is under loss and not growing | ||||||||||
| Current Price of Share | $ 6.00 | $ 8.50 | ||||||||||
| Net Profit | $ (95,136.00) | $ 87,960.00 | ||||||||||
| Shares Outstanding | 100,000 | 100,000 | ||||||||||
| EPS | $ (0.95) | $ 0.88 | ||||||||||
| P/E Ratio | -6.31 | 9.66 | ||||||||||
Part 3
| Part 3 | |||||||||||
| GIVEN | A. Breakeven | Break even point is that point of production where there is no profit no loss on the produced units. So as mangers, first of all we will analyze the whole scenario if we found that the production of more bags will give us profits then we will take the decision of to increase our production beyond the break even point(In both cases units and dollars) otherwise not. | |||||||||
| Units | Unit Price | ||||||||||
| Sales | 40,000 | $ 50.00 | $ 2,000,000.00 | Fixed Cost: | $ 600,000.00 | ||||||
| Less | Variable Cost | 40,000 | $ 25.00 | $ 1,000,000.00 | Contribution Per Unit: | $ 25.00 | |||||
| Fixed Cost | $ 600,000.00 | Breakeven Units | 24,000 | ||||||||
| Earnings Before Interest and Tax | $ 400,000.00 | Breakeven $ Value | $ 1,200,000.00 | ||||||||
| Interest Expense | $ 120,000.00 | ||||||||||
| Earnings Before Tax | $ 280,000.00 | B. Degree of Financial Leverage | The advantage of financial leverage arises the possibilities that funds borrowed at a fixed interest rate can be used for investment opportunities earning a rate of return higher than the interest paid. Higher the Financial leverage shows a good condition of the firm but with high debt financing. So Financial leverage helps to calculate the risk from debt financing | ||||||||
| EBIT | $ 400,000.00 | ||||||||||
| Income Tax Expense | 20% | $ 56,000.00 | EBT | $ 280,000.00 | |||||||
| Net Income | $ 224,000.00 | Degree of Financial Leverage | 1.4 | ||||||||
| 142.86% | |||||||||||
| C. Degree of Operating Leverage | Degree of Operating Levarage tells the impact of change in sales on the level of operating profits of the firm. A high Degree of Operating Levarage condition is a high risk situation and even a small decrease in sales can excessively effect the firms efforts to record profits. This is a number is used to measure the risky situations in the financial Planning. | ||||||||||
| Contribution | $ 1,000,000.00 | ||||||||||
| EBIT | $ 400,000.00 | ||||||||||
| Degree of Operating Leverage | 2.5 | ||||||||||
| 250.00% | |||||||||||
