Module 1 Assignment

All files must have students name, date, and course on first page. (3 points)

All assignments must be submitted in pdf and excel. (4 points)

All files must be named as StudentsLastName_CM4119_ModuleNumber (for example: BarbosaResende_CM4119_Module1.pdf) (3 points)

Balance Sheet

In a short explanation:

• Assets are everything that a company owns
  • For example, office equipment, cash, inventory, capital or financial lease, etc.
• Liabilities are everything that a company owes
  • For example, unpaid bills, taxes, mortgage, operating lease, etc.
• Equity is what the company owes to its owners (shareholders), and it is calculated as the difference between assets and liabilities
• Debt to equity ratio helps assessing the results of a company by showing how much debt a company needs to run its business compared to its equity

1. (40 points) You are working for a company and you have to make some decisions about the future of this company. In order to make the necessary decision you need to understand the financial statements of the company. However, the spreadsheet had all information but the calculations were not complete. Based on this information:
2. Calculate the empty cells on the balance sheet, income statement, and cash flow:

(in $ thousands)

Balance Sheet
2020
Assets		Liabilities
Current assets	5,548	Current liabilities	8,285
Property and equipment	15,850	Long-term liabilities	26,153
ROU assets	4,020
Other assets	5,588
		Total Liabilities	(4 points)
		Equity
		Earnings (deficit)	(4 points)
Total assets	(4 points)	Total Liabilities and Equity	(4 points)

Income Statement	2020
Operating revenues	2,019
Operating expenses	3,276
Operating income (loss)	(4 points)
Nonoperating income (expense)	(142)
Income (loss) before income taxes	(4 points)
Income tax provision (benefit)	(311)
Net income (loss)	(4 points)

Cash Flow	2020
Net cash provided by (used in) operating activities	(3,267)
Net cash provided by (used in) investing activities	(2,166)
Net cash provided by (used in) financing activities	5,502
Net increase (decrease) in cash and restricted cash	(4 points)
Cash and restricted cash at beginning of year	150
Cash and restricted cash at end of year	(4 points)

1. What is the debt to equity ratio? (4 points)

1. (20 points) Based on the income statement from question 1, you started projecting the next year (2021) operations.
2. What was the income tax provision rate for the company in 2020?

(6 points)

1. You already know that the company will be able to:

• reduce the operating expenses in 20%
• increase the operating revenues in 50%
• maintain the same income tax provision rate
• maintain the same nonoperating expense from 2020

Based on that, complete the forecast income statement:

Income Statement	Forecast (2021)
Operating revenues	(2 points)
Operating expenses	(2 points)
Operating income (loss)	(2 points)
Nonoperating income (expense)	(2 points)
Income (loss) before income taxes	(2 points)
Income tax provision (benefit)	(2 points)
Net income (loss)	(2 points)

1. (30 points) After seeing the forecast income statement from question 2, the CEO and CFO said that they need the company to achieve a net income of at least $500,000. As the head of the operations department, you see two options
2. Decrease the operating expenses by more than 20%
3. Increase the operating revenues by more than 50%

1. In this case, if the operating revenues remain at a growth rate of 50% compared to the 2020 income statement, what is the new rate for the operation expenses in order to achieve the desired net income? Present the 2021 forecast for the income statement.

New operation expenses rate (2 points)

Income Statement	Forecast (2021)
Operating revenues	(1 points)
Operating expenses	(2 points)
Operating income (loss)	(1 points)
Nonoperating income (expense)	(1 points)
Income (loss) before income taxes	(1 points)
Income tax provision (benefit)	(1 points)
Net income (loss)	(1 points)

1. If the operating expenses can only be reduced by 20% compared to the 2020 income statement, what is the new growth rate for the operation revenue in order to achieve the desired net income? Present the 2021 forecast for the income statement.

New operation revenue rate (2 points)

Income Statement	Forecast (2021)
Operating revenues	(2 points)
Operating expenses	(1 points)
Operating income (loss)	(1 points)
Nonoperating income (expense)	(1 points)
Income (loss) before income taxes	(1 points)
Income tax provision (benefit)	(1 points)
Net income (loss)	(1 points)