# WSU Small Business Booster Every year, Robin identifies a small business to invest her money in because

## Question:

WSU Small Business Booster

Every year, Robin identifies a small business to invest her money in because she wants to support

companies that WSU students have started. Robin named the program “WSU Small Business Booster.”

Robin is a graduate of the Carson College of Business and is now a successful venture capitalist in Silicon

Valley. Different from her venture capital role of investing in high technology start-ups that require

significant funding, her focus on WSU students is to provide a little financial support and some advice so

students can learn about accounting and business from running their own small businesses.

Each year in July WSU students interested in the WSU Small Business Booster program submit a short

description of their small business along with an income statement and balance sheet for their business

over the last 12 months. Robin finds the financial statements valuable in making her decision on which

business to support. She compares the financial statements to get an understanding of each business

and also calculates and compares financial ratios.

Robin has already reviewed the 15 submissions for July 2021 and has narrowed her decision to two

business proposals: Catherine’s Canine Cookies and Bill’s Snack Truck. Below are descriptions of these

two finalists. The information presented below is for the 12 months ending June 30, 2021. Create an

income statement and balance sheet for each company.

Catherine’s Canine Cookies

Catherine Yang started baking fun, and healthy, dog treats at the end of last summer and sells them to

friends, family, and at the Moscow Farmer’s Market. Last July, Catherine had $50 of her own money she

could put into her business, but it wasn’t enough. She borrowed $150 from her dad so she could buy the

raw ingredients that went into making her cookies. Catherine also purchased two bowls, two baking

sheets, and a mixer. The bowls cost $5 each, the baking sheets cost $6 each, and the mixer cost $20. She

expected to use the bowls and baking sheets for two years and the mixer for five years.

Throughout the year, Catherine purchased raw ingredients three times. The first time was to make

cookies for the farmer’s market in the Fall, the second time was to make cookies for the farmer’s market

in the Spring, and the third time was to make cookies for the farmer’s market the following Fall. Her

receipts were as follows: Safeway for $23.45, Walmart for $18.75, and Safeway for $35.76. With all of

these ingredients throughout the year, she was able to produce 130 cookies. She did enlist the help of

two friends to help her make the cookies. Steve worked five hours throughout the year, and Asha

worked 10 hours. She paid them $9 an hour. By June 30, 2021, she had already paid Steve, but Asha

worked five hours on June 30, 2021 in preparation for the farmer’s market in Fall 2021. So Catherine has

not paid Asha for that time yet.

She did pretty well selling the cookies, especially at the Moscow Farmer’s market. Throughout the year,

Catherine sold 112 cookies for an average price of $3.56 each. Two customers returned one cookie each

because they didn’t realize they were for dogs. And one of her best friends didn’t have any cash on her

and promised she would pay Catherine back for the three cookies she bought. Catherine has yet to see

that money, but she plans on following up with her friend. Catherine had wanted to pay her dad back

but decided she had better keep some cash to make the next batch of cookies. So she only paid her dad

$25 of the money she owed him.

Overall, Catherine felt pretty good about her first year of business, especially since she only made three

batches of cookies throughout the year. With financial support through the WSU Small Business Booster

program, she could bake and sell many more batches of cookies next year.

Bill’s Snack Truck

Bill Goldmann started a business idea he had about two years ago when he began college at WSU. He

knew college students walked all over campus, so he decided to use his pickup truck to sell drinks and

snacks to students in the late afternoons and nights. Bill purchased drinks and snacks in bulk at Costco

and then sold them at a premium from his truck. His parents had already given him a truck for college,

so he just needed some cash to buy inventory. His brother thought Bill had a great idea, so he invested

$50 into Bill’s business. Bill’s brother didn’t need to be paid back but wanted to own a portion of Bill’s

business (and, therefore, earn a portion of Bill’s profits). Bill also needed to pitch in $50 to cover initial

expenses.

Two years ago, on July 1, 2019, Bill purchased some items to display food and drinks in the back of his

pickup truck. He purchased shelves for $33 from Pullman Building Supply. He also thought he could

attract customers by having some lights on his truck, so he bought some stringed lights from Walmart

for $15. At that time, he guessed that he could use both the shelves and lights for a total of three years.

On July 1, 2020, Bill had some inventory leftover from his previous purchase. He had $15 worth of sodas

and $10 worth of cookies and chips. Throughout the last year, Bill had spent an additional $133 on

drinks and snacks at Costco. One of his friends was moving back home and had an extra 12 sodas in his

refrigerator and gave them to Bill to sell. Bill told his friend he’d pay him $4 for the sodas, but he still

owes it to him. Bill also spent $33.54 on gas throughout the year.

Bill had a pretty good system of recording his purchases and sales in a spreadsheet. Bill sold 75 cans of

soda throughout the year at an average price of $2 per can and 64 bags of chips or cookies for an

average price of $2.50 per bag. There was a heatwave at the end of June, and three of Bill’s friends were

very thirsty but didn’t have any money but promised to pay him back if he gave them each a soda. Bill

gave them a total of three sodas and got an IOU from each of his friends. At the end of the year, on June

30, 2021, Bill had 15 cans of soda that cost an average of $0.23 per can and ten bags of chips that cost

an average of $0.15 per bag.

Bill was having a good time with his snack truck business. His main challenge was that he had limited

time because he had to study and couldn’t drive the snack truck around as often as he’d like. If he

receives funding from the WSU Small Business Booster program, he could hire a couple of people to

drive the snack truck, increasing sales significantly.

Robin thought about the two businesses and tried to decide which company was stronger financially.

INSTRUCTIONS

Help Robin analyze the financial performance of these two businesses by completing the following:

1. Create income statements and balance sheets for Catherine’s Canine Cookies and Bill’s Snack

Truck for the year ending June 30, 2021. What are some strengths of Catherine’s business over

Bill’s and vice versa?

HINT: For Bill’s Snack Truck, Bill purchased the shelves and lights two years ago on July 1, 2019.

The balance sheet you are creating is for the 12 months ending June 30, 2021. So when

calculating accumulated depreciation on the balance sheet, you need to consider that he has

used two years’ worth of these fixed assets.

2. Calculate financial ratios for Catherine’s Canine Cookies and Bill’s Snack Truck using the

spreadsheet provided and consider which business you would invest in and why. (Show ratios in

the format shown in Exhibit 15.6. For example, Return on Sales and Return on Equity should be

percentages, Earnings per Share should be in dollars, the other ratios should be decimals,

and all values should be rounded to 2 decimal places).

**To do excel sheet**

**Ratios Bill****Profitability**

Return on Sales Net income/net sales

Return on Equity Net income/total owners' equity

Earnings per Share NA Net income/average # of shares - No information on # of shares

**Liquidity**

Current Ratio Current assets/current liabilities

Quick Ratio (Current assets - inventory)/current liabilities

**Activity**

Inventory Turnover COGS/ending inventory

Accounts Receivable Turnover Net sales/average account receivable

**Leverage**

Debt: Equity Total liabilities/Total equity

Debt: Total Assets Total liabilities/Total assets

**Ratios Catherine Bill**

**Profitability**

Return on Sales - -

Return on Equity - -

Earnings per Share NA NA

**Liquidity**

Current Ratio - -

Quick Ratio - -

**Activity**

Inventory Turnover - -

Accounts Receivable Turnover - -

**Related Book For**