As a manager, you will usually not prepare financial statements. Your expertise will, instead, be valuable in reading, analyzing, and interpreting them. However, as a learner, preparing such statements will help you to understand them in better detail.
For this Assignment, read the chapter case study “Cash Flows and Financial Statements at Sunset Boards, Inc.” at the end of Chapter 2 of your course text (this is located in the attachment). The case deals with cash flows and financial statements at Sunset Boards, Inc.
Prepare the following financial statements using the Financial Answer Blank Statements Template (attached) in this week’s Learning Resources:
· An income statement for 2015 and 2016
· A balance sheet for 2015 and 2016
· Operating cash flow for each year (Ross et al., 2014)
(Be sure to submit it as an Excel file. Do not copy it on a Word file because the teacher need to see the formulas in some of the cells.)
For Part 2 you just need to answer the two questions in the case study (see attached in case study). The combined word minimum of answering the two questions needs to be 300-350 words minimum.
FNCE WK2 A
CHAPTER CASE STUDY Cash Flows and Financial Statements at Sunset Boards, Inc. Sunset Boards is a small company that manufactures and sells surfboards in Malibu. Tad Marks, the founder of the company, is in charge of the design and sale of the surfboards, but his background is in surfing, not business. As a result, the company’s financial records are not well maintained. The initial investment in Sunset Boards was provided by Tad and his friends and family. Because the initial investment was relatively small, and the company has made surfboards only for its own store, the investors haven’t required detailed financial statements from Tad. But thanks to word of mouth among professional surfers, sales have picked up recently, and Tad is considering a major expansion. His plans include opening another surfboard store in Hawaii, as well as supplying his “sticks” (surfer lingo for boards) to other sellers. Tad’s expansion plans require a significant investment, which he plans to finance with a combination of additional funds from outsiders plus some money borrowed from banks. Naturally, the new investors and creditors require more organized and detailed financial statements than Tad has previously prepared. At the urging of his investors, Tad has hired financial analyst Jameson Reid to evaluate the performance of the company over the past year. After rooting through old bank statements, sales receipts, tax returns, and other records, Jameson has assembled the following information: Sunset Boards currently pays out 50 percent of net income as dividends to Tad and the other original investors, and has a 20 percent tax rate. You are Jameson’s assistant, and he has asked you to prepare the following: An income statement for 2015 and 2016. A balance sheet for 2015 and 2016. Operating cash flow for each year. Cash flow from assets for 2016. Cash flow to creditors for 2016. Cash flow to stockholders for 2016. Questions How would you describe Sunset Boards’ cash flows for 2016? Write a brief discussion. In light of your discussion in the previous question, what do you think about Tad’s expansion plans?