| | Assignment 1.6 |
| | Mini-Case Study: Financial Statements for Sunset Boards |
| | | Sunset Boards is a small company that manufactures and sells surfboards in Malibu. Tad Marks, the founder of the company, is in charge of the design and sale of the surfboards, but his background is in surfing, not business. As a result, the company's financial records are not well maintained. |
| | | | | | | | | | | | 2018 | | 2019 |
| | | The initial investment in Sunset Boards was provided by Tad and his friends and family. Because the initial investment was relatively small, and the company made surfboards only for its own store, the investors haven't required detailed financial statements from Tad. But thanks to word of mouth among professional surfers, sales have picked up recently, and Tad is considering a major expansion. His plans include opening another surfboard store in Hawaii, as well as supplying his "sticks" (surfer lingo for boards) to other sellers. | | | | | | | | Cost of goods sold | $ 196,619 | | $ 248,263 |
| | | | | | | | | | | Cash | 28,372 | | 42,865 |
| | | | | | | | | | | Depreciation | 55,506 | | 62,738 |
| | | | | | | | | | | Interest expense | 12,067 | | 13,831 |
| | | | | | | | | | | Selling & Administrative Expenses | 38,668 | | 50,469 |
| | | | | | | | | | | Accounts payable | 20,143 | | 34,091 |
| | | Tad's expansion plans require a significant investment, which he plans to finance with a combination of additional funds from outsiders plus some money borrowed from banks. Naturally, the new investors and creditors require more organized and detailed financial statements than Tad has previously prepared. At the urging of his investors, Tad has hired financial analyst Christina Wolfe to evaluate the performance of the company over the past year. | | | | | | | | Fixed assets (without depreciation) | 344,881 | | 461,088 |
| | | | | | | | | | | Accumulated Depreciation | 85,506 | | 148,244 |
| | | | | | | | | | | Sales | 385,724 | | 470,172 |
| | | | | | | | | | | Accounts receivable | 20,104 | | 26,078 |
| | | | | | | | | | | Notes payable | 22,855 | | 24,955 |
| | | | | | | | | | | Long-term debt | 123,607 | | 140,000 |
| | | After rooting through old bank statements, sales receipts, tax returns, and other records, Christina has assembled the financial information shown in the table to the right. ======> | | | | | | | | Inventory | 38,706 | | 52,057 |
| | | | | | | | | | | New equity issued (Common Stock) | - | | 15,000 |
| | | As Christina's assistant, you are asked to prepare financial calculations and then use them to evaluate the wisdom of Tad's expansion plans. The financial statements and calculations you must prepare include: | | | | | | | | Tax rate (average on all Taxable Income) | 30% |
| | | | | | | | | | | Dividend Payout Ratio (of Net Income) | 40% |
| | | 1) Prepare an Income Statement for both 2018 and 2019 |
| | | 2) Prepare a Balance Sheet for both 2018 and 2019 | | | | | | | | | *All Data as of year end, December 31st |
| | | 3) Create a Cash Flow Statement for 2019 |
| | | 4) Finally, using the above calculations as a foundation for your analysis, comment on the wisdom of Tad's expansion plans. Should the company expand at this time? Why or why not? Provide a few sentences of discussion and your conclusion to demonstrate your ability to draw insights from these financial statements. |
| | | Create your Original Solution Below - Be sure to show all calculations, to carefully complete all parts of the assignment, and to clearly indicate answers (create additional worksheets to organize your work if necessary). |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | This is the Student Template, provided in the assignment instructions October 2019 |
| | | |
usa94
Assignment1-6Worksheet.xlsx
