Assignment 1 FIN 1013 Case study analysis Read the Case below regarding ABC Company. Use the information contained in the Case to fill out the Excel Document found in Moodle (ABC Compassgnment xlsx Work in your Group to follow the steps below for Assignment1 Steps. 1) Construct Financial Statements using Excel. Your group's sob is to fill out the values for the years 2014 (current) and the 2015 (projected) in the Statement of Income and Statement of Financial Position (fill all the green cells). If no information is given about a particular value assume it is the same as last years. Pay close attention to the potential sources of financing adjust the Statement of Income and Statement of Financial Position accordingly in excel When you are finished with the Excel Document save it as Group#ABC CorpAl Al Values shown in Excel are in thousands of dollars. 2) Ratio Analysis (Read the CASE and complete step 1 FIRST) Calculate and analyze the following Ratios for the years 2014 and 2015. What do you notice about the change in these Ratios? Provide a brief explanation for the reason of the change, or whether the Ratios below should be any cause for concern Current Ratio, Return on Assets, Quick Ratio, Net Working Captial 3) Discussion Questions (Read the CASE and complete step 1 FIRST) 0 Did you decide to Rent or Buy the Warehouse? Why? (Hint: Compare the cost of financinei ) In the Statement of Financial Position explain why there are only zero's at the bottom, what does this signify? (Located on sheet 2 Row 47 in the excel file). Explain your team's plan to finance the purchase of the additional inventory and warehouse? What is the total cost of the expansion? What is the total cost of financing for the expansion? (Hint: The company has been preapproved for a short term loan, as well as has access to retained earnings from the previous year THE CASE: It is currently Q4 in 2014 and ABC corporation has placed your team in charge of preparing the company's Income Statement and Balance Sheet (Statement of Financial Position) for 2014, as well as the projected statements for 2015. You are told that sale revenue has increased 6% from the 2013 values. ABC Company also plans to expand their inventory to meet growing demand and they forecast sales revenue to increase by 35% in 2015 (from current values). 40,045.00$ of additional purchases were made in 2014 (Paid for with Retained Earnings), with another 230,545.00 planned to be purchased in the future to expand inventory in 2015. Along with the increase in inventory, Freight expenses are expected to double. ABC has been preapproved a short-term loan in the amount of $100,000 today to be repaid in full at the end of 2015 to finance this expansion, the rest will be paid for using the companies Retained Earnings. The total financing cost of the loan will be $9,500. Labour cost is expected to be the same as last year and are expected to increase by 15% in 2015. ABC is also planning to hire 2 new employees on salary, one for Distribution and one as Administrditive staff in 2015, they will be paid $40,000/year each. Commissions are expected to increase by $30,000 in 2015. Plant Property and equipment are also the same as last year (2013), however, in the coming year (2015) the company is faced with a choice to buy or rent a warehouse to house the additional inventory. The building may be purchased outright for 350,000$ or leased on a one-year term for $90,000 spilt into 12 equal monthly payments. Assume a 15% down payment is required to buy the land, with payments made monthly amortized over 25 years, and the interest rate on the mortgage is fixed at 2.5%. Whether you decid to rent or buy the land is up to your team to decide, either way provide a rationale and adjust your financial statements for the projected year accordingly. **If you choose "buy, add the principal payments of the loan for 12 months and include them in the "current portion of long term debt" cell in the Statement of Financial Position. Add the total financing cost of the loan (interest portion less the principal) for 12 months and add to existing financing costs (Cell A35) in the Statement of Income. ** If you choose lease, add the total monthly payments under "leasing" in the Statement of Income PROTECTED VIEW Be careful--files from the Internet can contain viruses. Unless you need to edit it's safe to stay in Protected View C18 B 1 Statement of Income 2011 2012 2013 2014(Current) 2015(Projected) 1,083 1,058 1.564 630 369 30 380 3 5 787 355 29 366 4 529 4 0 1 207 0 754 296 304 357 0 0 2 3 4 5 Revenue 6 7 Cost of sales 8 Purchases 9 Freight in 10 Labour 11 Depreciation/amortization 12 Other charges 13 Total cost of sales 14 15 Gross profit 16 17. Other income 10 19 Distribution costs 20 Salaries 21 Commissions 22 Traveling 23 Advertising 24 Depreciation amortization 25 Other charges 26 Total distribution costs 27 28 Administrative expenses 29 Salaries 30 Leasing Depreciation amortization 32 One charges 33 Total administrative expenses 34 35 Financing costs 36 37 Total expenses less other income 38 39 Profit before taxes 40 41 income to expense 42 43 Profit for the year 44 34 33 12 37 32 47 16 10 3 2 10 98 SONOB O 117 94 201 13 20 147 102 20 9 11 142 107 26 24 16 173 7 14 248 240 304 48 64 53 10 18 12 38 46 Statement of Income Statement of Financial Position 1 D E Statement of Financial Position 2011 2012 2013 2014[Current) 2015(Projected) 90 156 14 238 14 0 . 0 24 128 47 50 220 62 252 93 81 158 159 210 298 109 247 3 10 0 0 114 241 4 9 0 13 0 0 369 368 525 450 528 684 2 3 Assets 4 Non-current assets 5 Property, plant and equipment 6 Goodwill 7 Investments 8 Due to shareholders 9 Sub-total 10 Accumulated depreciation/amortization 11 12 Total non-current assets 13 14 Current assets 15 Inventories 16 Trade receivables 17 Prepaid expenses 18 Cash and cash equivalents 19 Other current asset 1 20 Other current asset 2 21 22 Total current assets 23 24 Total assets 25 26 Equity and liabilities 27 Share capital 28 Retained earnings 29 Other comprehensive income (loss) 30 31 Total equity attributable to owners 32 33 Total non-current liabilities 34 35 Current liabilities 36 Trade and other payables 37 Short-term borrowings 38 Current portion of long-term debt 39 Accruals 40 Other current liability 41 Total current liabilities 42 43 Total labilities 44 45 Total equity and liabilities 46 47 Net: Assets - Equity + Liabilities AR Statement of income 25 125 0 25 171 9 25 212 0 150 196 237 63 51 130 106 94 85 0 58 0 237 137 198 0 38 . 43 0 279 373 300 330 447 450 526 684 0 0 0 Statement of Financial Position Assignment 1 FIN 1013 Case study analysis Read the Case below regarding ABC Company. Use the information contained in the Case to fill out the Excel Document found in Moodle (ABC Compassgnment xlsx Work in your Group to follow the steps below for Assignment1 Steps. 1) Construct Financial Statements using Excel. Your group's sob is to fill out the values for the years 2014 (current) and the 2015 (projected) in the Statement of Income and Statement of Financial Position (fill all the green cells). If no information is given about a particular value assume it is the same as last years. Pay close attention to the potential sources of financing adjust the Statement of Income and Statement of Financial Position accordingly in excel When you are finished with the Excel Document save it as Group#ABC CorpAl Al Values shown in Excel are in thousands of dollars. 2) Ratio Analysis (Read the CASE and complete step 1 FIRST) Calculate and analyze the following Ratios for the years 2014 and 2015. What do you notice about the change in these Ratios? Provide a brief explanation for the reason of the change, or whether the Ratios below should be any cause for concern Current Ratio, Return on Assets, Quick Ratio, Net Working Captial 3) Discussion Questions (Read the CASE and complete step 1 FIRST) 0 Did you decide to Rent or Buy the Warehouse? Why? (Hint: Compare the cost of financinei ) In the Statement of Financial Position explain why there are only zero's at the bottom, what does this signify? (Located on sheet 2 Row 47 in the excel file). Explain your team's plan to finance the purchase of the additional inventory and warehouse? What is the total cost of the expansion? What is the total cost of financing for the expansion? (Hint: The company has been preapproved for a short term loan, as well as has access to retained earnings from the previous year THE CASE: It is currently Q4 in 2014 and ABC corporation has placed your team in charge of preparing the company's Income Statement and Balance Sheet (Statement of Financial Position) for 2014, as well as the projected statements for 2015. You are told that sale revenue has increased 6% from the 2013 values. ABC Company also plans to expand their inventory to meet growing demand and they forecast sales revenue to increase by 35% in 2015 (from current values). 40,045.00$ of additional purchases were made in 2014 (Paid for with Retained Earnings), with another 230,545.00 planned to be purchased in the future to expand inventory in 2015. Along with the increase in inventory, Freight expenses are expected to double. ABC has been preapproved a short-term loan in the amount of $100,000 today to be repaid in full at the end of 2015 to finance this expansion, the rest will be paid for using the companies Retained Earnings. The total financing cost of the loan will be $9,500. Labour cost is expected to be the same as last year and are expected to increase by 15% in 2015. ABC is also planning to hire 2 new employees on salary, one for Distribution and one as Administrditive staff in 2015, they will be paid $40,000/year each. Commissions are expected to increase by $30,000 in 2015. Plant Property and equipment are also the same as last year (2013), however, in the coming year (2015) the company is faced with a choice to buy or rent a warehouse to house the additional inventory. The building may be purchased outright for 350,000$ or leased on a one-year term for $90,000 spilt into 12 equal monthly payments. Assume a 15% down payment is required to buy the land, with payments made monthly amortized over 25 years, and the interest rate on the mortgage is fixed at 2.5%. Whether you decid to rent or buy the land is up to your team to decide, either way provide a rationale and adjust your financial statements for the projected year accordingly. **If you choose "buy, add the principal payments of the loan for 12 months and include them in the "current portion of long term debt" cell in the Statement of Financial Position. Add the total financing cost of the loan (interest portion less the principal) for 12 months and add to existing financing costs (Cell A35) in the Statement of Income. ** If you choose lease, add the total monthly payments under "leasing" in the Statement of Income PROTECTED VIEW Be careful--files from the Internet can contain viruses. Unless you need to edit it's safe to stay in Protected View C18 B 1 Statement of Income 2011 2012 2013 2014(Current) 2015(Projected) 1,083 1,058 1.564 630 369 30 380 3 5 787 355 29 366 4 529 4 0 1 207 0 754 296 304 357 0 0 2 3 4 5 Revenue 6 7 Cost of sales 8 Purchases 9 Freight in 10 Labour 11 Depreciation/amortization 12 Other charges 13 Total cost of sales 14 15 Gross profit 16 17. Other income 10 19 Distribution costs 20 Salaries 21 Commissions 22 Traveling 23 Advertising 24 Depreciation amortization 25 Other charges 26 Total distribution costs 27 28 Administrative expenses 29 Salaries 30 Leasing Depreciation amortization 32 One charges 33 Total administrative expenses 34 35 Financing costs 36 37 Total expenses less other income 38 39 Profit before taxes 40 41 income to expense 42 43 Profit for the year 44 34 33 12 37 32 47 16 10 3 2 10 98 SONOB O 117 94 201 13 20 147 102 20 9 11 142 107 26 24 16 173 7 14 248 240 304 48 64 53 10 18 12 38 46 Statement of Income Statement of Financial Position 1 D E Statement of Financial Position 2011 2012 2013 2014[Current) 2015(Projected) 90 156 14 238 14 0 . 0 24 128 47 50 220 62 252 93 81 158 159 210 298 109 247 3 10 0 0 114 241 4 9 0 13 0 0 369 368 525 450 528 684 2 3 Assets 4 Non-current assets 5 Property, plant and equipment 6 Goodwill 7 Investments 8 Due to shareholders 9 Sub-total 10 Accumulated depreciation/amortization 11 12 Total non-current assets 13 14 Current assets 15 Inventories 16 Trade receivables 17 Prepaid expenses 18 Cash and cash equivalents 19 Other current asset 1 20 Other current asset 2 21 22 Total current assets 23 24 Total assets 25 26 Equity and liabilities 27 Share capital 28 Retained earnings 29 Other comprehensive income (loss) 30 31 Total equity attributable to owners 32 33 Total non-current liabilities 34 35 Current liabilities 36 Trade and other payables 37 Short-term borrowings 38 Current portion of long-term debt 39 Accruals 40 Other current liability 41 Total current liabilities 42 43 Total labilities 44 45 Total equity and liabilities 46 47 Net: Assets - Equity + Liabilities AR Statement of income 25 125 0 25 171 9 25 212 0 150 196 237 63 51 130 106 94 85 0 58 0 237 137 198 0 38 . 43 0 279 373 300 330 447 450 526 684 0 0 0 Statement of Financial Position