Scenario: Your team has been hired to provide financial analysis for a start-up company, Bobble in Style, which produces customized bobble heads. The bobble heads are made out of less rigid materials and are more true to life than those of competitors. The company inventors, Mr. and Mrs. Lee, are going to pitch their idea to Shark Tank in a few months, but first they need to have a better understanding of the businessfinancials. The Lee’s are already creating and selling their product from their home-based office and work area. They know what costs areinvolved with making the bobble heads on a small scale, but they don’t have an understanding of financial figures beyond basic costs. Theyneed you to make sense of various financial figures for them.
The Project: There are several financial analysis tasks involved with this project, which are outlined below. You will also need to create a written executive summary (one page in length). The specific financial analysis tasks and related information are listed below.
Financial Statements: Develop an Income Statement, Cash Flow Statement, and Balance Sheet based on the provided data for year 20XX (the previous year) that follows. Explain the purpose of each financial statement.
1. Income Statement Data for 20XX:
Gross Sales = $33,291
Coupons and Discounts = $549
Cost of Goods = $10,276
Labor = $0 (Mr. and Mr. Lee were the only ones working and did not pay themselves)
advertising fees =$2000
bank fees = $120
phone/internet = $1200
shipping = $1380
utilities = $900
office supplies = $785
Income tax = 26 %
2. Cash Flow Statement Data for 20XX:
Cash in bank = $21,120
Depreciation = $800
Proceeds from disposal of investment = $3,000
Capital Expenditure = -$1,600
Repayment of Bank Loan = -$5,000
Interest Expense Associated with Bank Loan = -$345
Consider any data relevant from the income statement.
3. Balance Sheet Data for 20XX:
Cash = $21,120
Accounts Receivable = $496
Accounts Payable = $200
Inventory = $10,507
Accumulated Depreciation = -$1,000
Common Stock = $0
Financial Ratios: Calculate the following financial ratios and explain the meaning of the results.
Net Profit Margin
Quick Ratio
Debt-to-Equity Ratio