Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

(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

  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) (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)

  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)
  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)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cases In Communications Law

Authors: John D Zelezny

5th Edition

0495050458, 9780495050452

More Books

Students also viewed these General Management questions

Question

Describe how the stages of your career path affect your net income.

Answered: 1 week ago

Question

8. What values do you want others to associate you with?

Answered: 1 week ago