In the following case study, you will be utilizing the balance sheets from two separate companies...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
In the following case study, you will be utilizing the balance sheets from two separate companies to make an investment decision. Imagine that you are an angel investor in the Reno/Tahoe area and you are interested in two companies. Each of these companies have been in business for two years and you have noticed their growth and market potential. Although these two companies are imaginary, this exercise will be using real interpretive analysis of the two companies' balance sheets to determine their long-term feasibility and success. It is your job as the angel investor to make the most wise and intelligent decision regarding which company is the most sound investment. As the angel investor who holds a sizable investment, you must examine both of these companies' annual metrics from the years 2018/2019 in Appendix A to determine some realistic factors that signify healthy companies. By the end of this exercise, you should be familiar with the aspects of a balance sheet and how to dissect the given information to see the truth behind the numbers. Definition of Problem Rick is a local successful entrepreneur who enjoys mentoring new startup companies. He is involved with the local chapter of an entrepreneurship club and often volunteers his time, expertise, and hard-earned capital. Among the dozen young entrepreneurs that he mentors, two companies catch his eye. He sees them as particularly viable, successful companies. As the founder and CEO of a successful local company, his CEO says he can make one $50,000 investment into one of the two companies. Now, Rick must decide in which of the two companies he should invest. One of the companies under consideration is Really Big Deal, Inc. (RBD). Like its namesake, it really is a really big deal because it is a novel idea with prospects of growth. Appendix A shows the balance sheet for the company RBD for the last two years. The second company is Most Incredible Wall Ever, LLC (MIWE), who has invented a technolody that can build walls in commercial buildings cheaper and faster than any other competitors. Because this is a new technology unlike this world has ever seen, it has prospects of becoming the next impacting product yielding sizable returns in a construction market that is continuing to see growth. However, it is also very risky with an easy possibility to be the next Napster or Palm Pilot, losing the entire investment. Calculate profitability and efficiency ratios and explain what each ratio means for the investor. Current Assets Cash Accounts Receivable Inventory Prepaid Insurance Total Current Assets Long-Term Assets Land Land Improvements Furniture & Fixtures Equipment Total Long Term Assets Total Assets Liabilities Accounts Payable Taxes Salaries/Wages Payable Interest Payable Total Current Liabilities. Long-Term Liabilities Loans Total Long-Term Liabilities Equity Common Stock Retained Earnings Total Equity Total Liabilities and Equity RBD 2018 2019 $ 15,000.00 $ 80,000.00 $ 60,000.00 $ 55,000.00 $ 80,000.00 $ 100,000.00 $5,000.00 $ 5,000.00 $160,000.00 $ 240,000.00 $150,000.00 $ 300,000.00 $400,000.00 $ 500,000.00 $ 40,000.00 $ 80,000.00 $120,000.00 $ 150,000.00 $710,000.00 $1,030,000.00 $870,000.00 $1,270,000.00 $100,000.00 $ 200,000.00 $ 30,000.00 $ 30,00 $ 40,000.00 $ 75,000.00 $ 30,000.00 $ 30,000.00 $200,000.00 $ 335,000.00 $250,000.00 $ 180,000.00 $250,000.00 $ 180,000.00 $150,000.00 $ 130,000.00 $270,000.00 $ 250,000.00 $420,000.00 $ 380,000.00 $870,000.00 $ 895,000.00 Current Assets Cash Accounts Receivable Inventory Prepaid Insurance Total Current Assets Long-Term Assets Land Land Improvements Furniture & Fixtures Equipment Total Long Term Assets Total Assets Liabilities Accounts Payable Taxes Payable Salaries/Wages Payable Interest Payable Total Current Liabilities Long-Term Liabilities Loan 1 Total Long-Term Liabilities MIWE Equity Common Stock Retained Earnings Total Equity Total Liabilities and Equity 2018 2019 50,000.00 $ 12,000.00 $ $ 35,000.00 $ 75,000.00 $120,000.00 $ 160,000.00 $ 8,000.00 $ 8,000.00 $175,000.00 $ 295,019.00 $126,000.00 $ 126,000.00 $300,000.00 $ 400,000.00 $50,000.00 $ 70,000.00 $125,000.00 $ 160,000.00 $601,000.00 $ 756,000.00 $776,000.00 $1,051,019.00 $ 60,000.00 $ 20,000.00 $ 25,000.00 $ 25,000.00 $ 30,000.00 $ 45,000.00 $ 25,000.00 $ 25,000.00 $140,000.00 $ 115,000.00 $322,000.00 $ 400,000.00 $322,000.00 $ 400,000.00 $ 64,000.00 $ 80,000.00 $250,000.00 $ 350,000.00 $314,000.00 $430,000.00 $776,000.00 $ 945,000.00 In the following case study, you will be utilizing the balance sheets from two separate companies to make an investment decision. Imagine that you are an angel investor in the Reno/Tahoe area and you are interested in two companies. Each of these companies have been in business for two years and you have noticed their growth and market potential. Although these two companies are imaginary, this exercise will be using real interpretive analysis of the two companies' balance sheets to determine their long-term feasibility and success. It is your job as the angel investor to make the most wise and intelligent decision regarding which company is the most sound investment. As the angel investor who holds a sizable investment, you must examine both of these companies' annual metrics from the years 2018/2019 in Appendix A to determine some realistic factors that signify healthy companies. By the end of this exercise, you should be familiar with the aspects of a balance sheet and how to dissect the given information to see the truth behind the numbers. Definition of Problem Rick is a local successful entrepreneur who enjoys mentoring new startup companies. He is involved with the local chapter of an entrepreneurship club and often volunteers his time, expertise, and hard-earned capital. Among the dozen young entrepreneurs that he mentors, two companies catch his eye. He sees them as particularly viable, successful companies. As the founder and CEO of a successful local company, his CEO says he can make one $50,000 investment into one of the two companies. Now, Rick must decide in which of the two companies he should invest. One of the companies under consideration is Really Big Deal, Inc. (RBD). Like its namesake, it really is a really big deal because it is a novel idea with prospects of growth. Appendix A shows the balance sheet for the company RBD for the last two years. The second company is Most Incredible Wall Ever, LLC (MIWE), who has invented a technolody that can build walls in commercial buildings cheaper and faster than any other competitors. Because this is a new technology unlike this world has ever seen, it has prospects of becoming the next impacting product yielding sizable returns in a construction market that is continuing to see growth. However, it is also very risky with an easy possibility to be the next Napster or Palm Pilot, losing the entire investment. Calculate profitability and efficiency ratios and explain what each ratio means for the investor. Current Assets Cash Accounts Receivable Inventory Prepaid Insurance Total Current Assets Long-Term Assets Land Land Improvements Furniture & Fixtures Equipment Total Long Term Assets Total Assets Liabilities Accounts Payable Taxes Salaries/Wages Payable Interest Payable Total Current Liabilities. Long-Term Liabilities Loans Total Long-Term Liabilities Equity Common Stock Retained Earnings Total Equity Total Liabilities and Equity RBD 2018 2019 $ 15,000.00 $ 80,000.00 $ 60,000.00 $ 55,000.00 $ 80,000.00 $ 100,000.00 $5,000.00 $ 5,000.00 $160,000.00 $ 240,000.00 $150,000.00 $ 300,000.00 $400,000.00 $ 500,000.00 $ 40,000.00 $ 80,000.00 $120,000.00 $ 150,000.00 $710,000.00 $1,030,000.00 $870,000.00 $1,270,000.00 $100,000.00 $ 200,000.00 $ 30,000.00 $ 30,00 $ 40,000.00 $ 75,000.00 $ 30,000.00 $ 30,000.00 $200,000.00 $ 335,000.00 $250,000.00 $ 180,000.00 $250,000.00 $ 180,000.00 $150,000.00 $ 130,000.00 $270,000.00 $ 250,000.00 $420,000.00 $ 380,000.00 $870,000.00 $ 895,000.00 Current Assets Cash Accounts Receivable Inventory Prepaid Insurance Total Current Assets Long-Term Assets Land Land Improvements Furniture & Fixtures Equipment Total Long Term Assets Total Assets Liabilities Accounts Payable Taxes Payable Salaries/Wages Payable Interest Payable Total Current Liabilities Long-Term Liabilities Loan 1 Total Long-Term Liabilities MIWE Equity Common Stock Retained Earnings Total Equity Total Liabilities and Equity 2018 2019 50,000.00 $ 12,000.00 $ $ 35,000.00 $ 75,000.00 $120,000.00 $ 160,000.00 $ 8,000.00 $ 8,000.00 $175,000.00 $ 295,019.00 $126,000.00 $ 126,000.00 $300,000.00 $ 400,000.00 $50,000.00 $ 70,000.00 $125,000.00 $ 160,000.00 $601,000.00 $ 756,000.00 $776,000.00 $1,051,019.00 $ 60,000.00 $ 20,000.00 $ 25,000.00 $ 25,000.00 $ 30,000.00 $ 45,000.00 $ 25,000.00 $ 25,000.00 $140,000.00 $ 115,000.00 $322,000.00 $ 400,000.00 $322,000.00 $ 400,000.00 $ 64,000.00 $ 80,000.00 $250,000.00 $ 350,000.00 $314,000.00 $430,000.00 $776,000.00 $ 945,000.00
Expert Answer:
Answer rating: 100% (QA)
Profitability Ratios Return on Assets ROA This ratio measures the companys ability to generate profits from its assets It is calculated as Net IncomeT... View the full answer
Related Book For
Posted Date:
Students also viewed these finance questions
-
Planning is one of the most important management functions in any business. A front office managers first step in planning should involve determine the departments goals. Planning also includes...
-
Read the case study "Southwest Airlines," found in Part 2 of your textbook. Review the "Guide to Case Analysis" found on pp. CA1 - CA11 of your textbook. (This guide follows the last case in the...
-
For the Week 1 Case Study, you will review the videos and below case information about how UPS is driven by its information systems technology. Upon thorough review of the case, you will then answer...
-
Develop a media plan that supports the planned marketing campaign. Include: a media budget, recommendations and rationale for the selected and integrated multi-media activities within the set budget...
-
What is the difference between accounts receivable and notes receivable?
-
An article in the Wall Street Journal, discussing large high-tech firms such as Amazon, Microsoft, and Google, stated, Todays high-tech giants may not be monopolies in the most classic sense....
-
When did the colonies taken in the 19th century gain their independence and what key factors were responsible for this?
-
1. Design tables in 3NF. As you create the database, include various codes for at least three of the fields. 2. Use sample data to populate the fields for at least three records in each table. 3....
-
Factor by grouping. 2w uw 6+3u
-
Using data in Exhibit 1, calculate Coxs break-even point in sales dollars (per hen). Taking into account his cumulative revenue for a hen, during which week (approximately) will the break-even point...
-
For the given linkage derive the vector loop equation and express the position of the slider as a function of the crank angle. Assume the links are rigid. crank2 Connection rod
-
When a dielectric slab completely fills the space between the plates of a parallel-plate capacitor, the magnitude of the bound charge is one-fourth the magnitude of the free charge. (a) What is the...
-
In Assignment 5.7, you identified all of the requirements for a ceremonial marriage in your state. In this assignment, you are to interview someone who was married in your state in order to determine...
-
You are given three bars of metal. Two of them are magnets, and the third is made of a magnetic material but is not magnetized. Describe how, using only the three bars, you could determine which of...
-
Rawls was not writing his Theory of Justice and Justice as Fairness for executives working in corporations but rather for government institutions forming public policy. Explain how the equal liberty...
-
A long straight wire carries a current of magnitude \(I\), and this current creates a magnetic field \(\vec{B}\). Derive an expression for the magnitude of the magnetic field a radial distance \(r\)...
-
In the case "OHNO Swim Club: Organizational Governance and Mission" of Rowe, W. G., & Dato-on, M. C. (2013). Introduction to nonprofit management: Text and Cases . 1) Describe the nonprofit...
-
A stock has had returns of 8 percent, 26 percent, 14 percent, 17 percent, 31 percent, and 1 percent over the last six years. What are the arithmetic and geometric average returns for the stock?
-
Assume that in the original Ityesi example in Table 31.1, all sales actually occur in the United States and are projected to be $60 million per year for four years. Keeping other costs the same,...
-
Using the implied volatility you calculated in Problem 14, and the information in that problem, use the Black-Scholes option pricing formula to calculate the value of the 750 January 2014 call option.
-
Rebecca is interested in purchasing a European call on a hot new stock, Up, Inc. The call has a strike price of $100 and expires in 90 days. The current price of Up stock is $120, and the stock has a...
-
How do you use functional requirements for this chapter?
-
How do you apply nonfunctional requirements for this chapter?
-
Identify the EBT for the word deployment.
Study smarter with the SolutionInn App