Company Financial Analysis

User Generated

Pryrfgr883

Business Finance

Description

Easy-Turn.doc Please help answer the Five questions.

Unformatted Attachment Preview

Corporation Finance Easy-Turn Toy Company Easy-Turn is a company that manufactures and sells a particular type of toy to manufacturers. It has been in business three months and finds itself with more orders taken than it has the funds to produce the goods on order. The company realizes that it must find a source of financing and convince this source that the company has a bright future and that a good source of short-term credit would be the missing ingredient to make this company a success. The company’s sales for the first quarter have been 20,000 for January, 30,000 units for February, and 40,000 units for March. The selling price of the good is $3 per unit and is sold to its customers offering a discount if paid within the period from sale to the end of month or net 60 days. 60% of each month’s sales are expected to the collected in the month following the sale and 8% of each month’s sales are expected to be collected in the 2nd month following the sale. Credit terms are not expected to change in the next year from the present credit policy. The relationship between factory costs and the rate of output are indicated in the operating statement. Inventories of finished goods, however, are always valued at a “normal cost” of $2.10 per unit, that is, $2 per unit variable and $0.1 per unit fixed. The $0.1 per unit fixed is a figure based on the entire year’s production and not one quarter. Expected Unit Sales and Production for the next 6 months Sales Production April 30,000 April 50,000 May 40,000 May 60,000 June 50,000 June 60,000 July 50,000 July 70,000 August 60,000 August 80,000 September 70,000 September 90,000 Materials are purchased each month for production and they are paid in the month in which they are purchased. A safety stock of raw materials is kept on hand to furnish a 30,000 unit production if needed . Cost of supplies and miscellaneous variable and fixed factory costs are paid in the month in which those costs are incurred. Direct labor, indirect labor, and supervision costs make up the total factory payroll. These, as well as selling commissions and expense and all administration costs, are paid half in the month in which they are incurred, half in the following month. Power bills are paid in full in the month after are incurred. Property taxes are paid quarterly and a disbursement of $3,000 will be made for these in April and July. The company has an arrangement by which it may borrow up to $20,000 for not longer than 60 days form the Roger County Bank; the bank charges interest at 6 percent per year on such loans, payable at the maturity of the loan. A cash balance of $4,000 must be maintained. No more cash is to be borrowed than is necessary to maintain this balance, but loans are made only in full thousands of dollars. Prepare: (A) An estimated income statement showing the effects of the expected transactions for the second quarter and third quarter. (B) Forecasts of collections from accounts receivable by months and of disbursements by months. (C) A summary cash statement, showing the amount of bank loans and the repayment of them; this statement should also show the expected cash balance at September 30. (D) An estimate balance sheet showing the expected financial position of the Illinois Novelty Company at September 30. (E) Upon completion, you will have three income statements and two balance sheets. Make a complete comparative financial analysis involving there four statements. Easy-Turn Toy Company Income Statement Quarter ended March 31,1985 Revenue Gross billing (90,000 units at $3 each ) Less: Provisions for uncollectible acc. Discount taken by customers $270,000 $5,400 1,620 7,020 Revenue from operations $262,980 Expenses Factory cost of goods (110,000 Units produced) Materials appropriated to production Direct labor costs incurred Factory overhead Variable costs: Indirect labor $11,000 Power 4,400 Supplies, Misc 6,600 Fixed Costs: Supervision 6,000 Property Taxes 3,000 Depreciation 3,000 Insurance 300 Miscellaneous 2,700 Total factory costs incurred Less: Unsold Inventory of finished goods Factory cost of goods sold Selling expenses (Which vary proportionately with sales) Administration costs and expenses (Fixed) Total Expenses Net margin from operations Interest Earnings before taxes Income taxes Net Profit Easy-Turn Toy Company $110,000 88,000 22,000 15,000 $ 235,000 42,000 $193,000 45,000 12,000 $250,000 $12,980 750 12,230 6,115 6,115 Balance Sheet March 31,1985 Cash in bank Accounts Receivable Allowance for Uncollectibles Inventories Safety Stock Finished Goods Prepaid Insurance Plant and Equipment Allowance for Depreciation $2,830 $94,200 5,400 30,000 42,000 190,000 3,000 Total Assets 88,800 72,000 2,100 187,000 $352,730 Liabilities Factory wages and salaries Sales Commission and expense Administration costs accured Accured property taxes Accounts payable(Power) Income taxes payable Notes payable (6%) 5 year Capital Stock Retained Earnings $23,500 10,000 2,000 3,000 2,000 6,115 50,000 250,000 6,115 Total Liabilities and Equity $352,730
User generated content is uploaded by users for the purposes of learning and should be used following Studypool's honor code & terms of service.

This question has not been answered.

Create a free account to get help with this and any other question!

Similar Content

Related Tags