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(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
- (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:
- 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) | (1,258) |
Nonoperating income (expense) | (142) |
Income (loss) before income taxes | (4 points) |
Income tax provision (benefit) | (311) |
Net income (loss) | (4 points) |
Wor
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) |
- What is the debt to equity ratio? (4 points)
- (20 points) Based on the income statement from question 1, you started projecting the next year (2021) operations.
- What was the income tax provision rate for the company in 2020?
(6 points)
- 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) |
- (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
- Decrease the operating expenses by more than 20%
- Increase the operating revenues by more than 50%
- 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) |
- 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) |
- (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
- Decrease the operating expenses by more than 20%
- Increase the operating revenues by more than 50%
- 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) |
- 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) |
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