At the heart of Pemberton, BC$,$ a unique partnership was formed between a chemist father and his downhill racer son. Together, they spotted a niche in the market for eco$-$friendly maintenance products that would benefit both cyclists and the environment. At PPI Bike, they craft highquality, bio$-$based bicycle maintenance products that strike a balance between performance and environmental responsibility. The companys products are free from petrochemicals, PTFEs, and harmful substances, ensuring the safety of cyclists and the preservation of our natural world. The range of products includes various bicycle products categorized into three main categories: cleaners, lubricants and suspension.PPI Bike was incorporated in the year $2021$ amidst COVID$-19$ when the demand to focus on exercise was on the rise, and people were prioritizing spending time on their health. This created an opportunity for the father$-$son duo to start their venture on high, and the corporation was doing great in the first two years. Due to an increase in demand and sales there was significant growth in the industry with new startups entering the market creating additional competition for PPI Bike. Amidst competition and increased cost and shortages in the supply chain came a new crisis in the industry as the world was going back to the pre$-$COVID scenario. It is now imperative for businesses to survive in a new space where competition is high, sales are not guaranteed and the company faces inflated cost of production. The son Jeffry Gates, is now taking the reins of the corporation as the new CEO. With the father focusing on new projects, Jeffry is poised to aggressively drive the growth of PPI Bike, sparking anticipation and excitement for what lies ahead.Jeffry doesnt have an in$-$depth background in finance & accounting is looking to seek some help from the MBA students to help him out with the queries. To begin with, Jeffry wants help with drafting a financial statement based on the trial balance extract available as per Appendix I. He isnt sure how to differentiateor understand asset, liabilities, expenses and income. In a conversation with him he noted that both rent expense paid and machinery purchased are one in the same as both transactions reduces the companys cash balance. He would appreciate any insight on these matters along with preparation of financial statementsJeffry is looking to explore the South American market for expansion as the continent offers perfect weather for cycling activities, which in turn offers an additional customer base that is interested in bicycle products. As a part of the strategy, Jeffry is collaborating with independent racers in the targeted cities to promote the PPI products & bring awareness to the audience. The sales manager believes that with this strategy, the corporation could generate sales from South American countries of approximately $$120,000($annually$?$ Monthly? Quarterly?$).$The plan is to hire $5$ racers, one each in Columbia, Mexico, Peru, Chile, and Brazil. The average fee for each racer is estimated to be $$1,500$ a month. For now, it can be estimated for the next fiveyears that the sales each year will increase by $15\%$ in these countries with a relative increase in the cost by $10\%.$ Jeffry doesnt want to use existing funds in the bank account for this marketing strategy for the first yearbut is open to any other options, such as term loans, lines of credit or any other option. He is uncertain of their impact on the financial statements and cash position Alternatively, the company can invest in a product modification project requiring an initial cash outflow of $$100,000.$ The incremental cash flows, as a result, are provided under Appendix II$.$ Jeffry needs clarification about investing in expansion or product modification projects. Jeffry was a mountain racer and now rides recreationally with friends and family.Some of his friends have business operations in Silicon Valley in the technology and finance sector. They suggested Jeffry consult a private equity fund if the business is not growing as expected. One of his friends referred him to the Avon Equity fund, where they offered to purchase his whole business for $1$ payment of USD $1$ million. Jeffry believes if we can show higher margins for the future years on the pitch deckto investors, the offer price may increase and he can get greater value out of it$.$ He is still determining the manipulation in the forecasted margin from the best ethical practice perspective. He is leaning to accept his friends advice on equity funds and wants to understand how the business is doing based on the financial data we have and the industry standards available. To address the concern, he wants your team to perform a complete a ratio analysis and conclude on key metrics of profitability, liquidity and solvency.. After the analysis, he wants your opinion on whether he should continue operating the business or take Avon Equity funds offer.Using the historical data, marketing strategy, product modification project analysis, and ratio analysis, Jeffry wants to prepare a master budget on a total basis, $($a per unit budget is not required$)$ for the next two years with budgeted financial statements. He wants to know how to use the budgeted information in the respective years. He has a vague understanding of variance analysis but is not completely confident about what it is and how to implement it in his business. He is requesting from your team a draft strategy on using the budgeted data and how to monitor and control the sales and respected costs. He is open to investing in any tools or software available that can help increase the companys efficiency and effectiveness with the above strategy Appendix I$-$ Trial Balance ExtractAmount in CADSr.No Name of the account $2023202220211$ Rent $ $18,150\mathrm{.}00$ $ $16,500\mathrm{.}00$ $ $5,000\mathrm{.}002$ Bank Acc $ $10,800\mathrm{.}00$ $ $45,000\mathrm{.}00$ $ $12,000\mathrm{.}003$ Inventory $ $80,000\mathrm{.}00$ $ $149,150\mathrm{.}00$ $ $140,000\mathrm{.}004$ Repairs and Maintenance $ $10,000\mathrm{.}00$ $ $8,500\mathrm{.}00$ $ $6,000\mathrm{.}005$ Acc Payable $ $75,000\mathrm{.}00$ $ $28,500\mathrm{.}00$ $ $68,000\mathrm{.}006$ Amazon fees $ $210,000\mathrm{.}00$ $ $175,000\mathrm{.}00$ $ $100,000\mathrm{.}007$ Marketing expenses $ $12,500\mathrm{.}00$ $ $1,500\mathrm{.}00$ $ $2,000\mathrm{.}008$ Utilities $ $6,500\mathrm{.}00$ $ $3,000\mathrm{.}00$ $ $4,200\mathrm{.}009$ Accounts Receivable $ $40,000\mathrm{.}00$ $ $50,000\mathrm{.}00$ $ $10,500\mathrm{.}0010$ Fixed Assets $ $218,000\mathrm{.}00$ $ $80,000\mathrm{.}00$ $ $45,000\mathrm{.}0011$ Sale of a product $ $668,700\mathrm{.}00$ $ $565,000\mathrm{.}00$ $ $399,000\mathrm{.}0012$ Cost of goods sold $ $220,000\mathrm{.}00$ $ $75,000\mathrm{.}00$ $ $60,000\mathrm{.}0013$ Taxes Payable $ $-$ $ $13,400\mathrm{.}00$ $ $-14$ Postage & Delivery $ $50,000\mathrm{.}00$ $ $25,700\mathrm{.}00$ $ $25,000\mathrm{.}0015$ Dividend paid $ $(50,000\mathrm{.}00)$ $ $-$ $ $-16$ Opening retained earnings $ $66,550\mathrm{.}00$ $ $36,400\mathrm{.}00$ $ $-17$ Cash $ $5,500\mathrm{.}00$ $ $1,000\mathrm{.}00$ $ $-18$ Accumulated Dep. on Fixed Assets $ $(60,000\mathrm{.}00)$ $ $(42,000\mathrm{.}00)$ $ $(22,500\mathrm{.}00)19$ Wages $ $25,000\mathrm{.}00$ $ $15,000\mathrm{.}00$ $ $12,000\mathrm{.}0020$ Dues & Subscriptions $ $22,000\mathrm{.}00$ $ $12,000\mathrm{.}00$ $ $18,000\mathrm{.}0021$ Credit card o$/$s $ $14,600\mathrm{.}00$ $ $6,000\mathrm{.}00$ $ $27,000\mathrm{.}0022$ Meals & entertainment expenses $ $13,000\mathrm{.}00$ $ $10,000\mathrm{.}00$ $ $8,000\mathrm{.}0023$ Bank Charges $ $10,500\mathrm{.}00$ $ $2,500\mathrm{.}00$ $ $10,500\mathrm{.}0024$ Office Supplies $ $2,500\mathrm{.}00$ $ $450\mathrm{.}00$ $ $800\mathrm{.}0025$ Computer and Internet expenses $ $10,500\mathrm{.}00$ $ $1,500\mathrm{.}00$ $ $2,000\mathrm{.}0026$ Telephone expense $ $11,000\mathrm{.}00$ $ $8,000\mathrm{.}00$ $ $5,500\mathrm{.}0027$ Prepaid expenses $ $2,500\mathrm{.}00$ $ $2,500\mathrm{.}00$ $ $-28$ Business license and permit $ $3,200\mathrm{.}00$ $ $3,200\mathrm{.}00$ $ $3,200\mathrm{.}0029$ Travel Expense $ $25,600\mathrm{.}00$ $ $15,000\mathrm{.}00$ $ $18,000\mathrm{.}0030$ Professional Fees $ $20,000\mathrm{.}00$ $ $16,500\mathrm{.}00$ $ $14,000\mathrm{.}0031$ Automobile Expense $ $2,900\mathrm{.}00$ $ $3,000\mathrm{.}00$ $ $4,500\mathrm{.}0032$ Other Income $ $42,750\mathrm{.}00$ $ $15,000\mathrm{.}00$ $ $10,000\mathrm{.}0033$ Common shares $ $100\mathrm{.}00$ $ $100\mathrm{.}00$ $ $100\mathrm{.}0034$ Insurance expense $ $30,000\mathrm{.}00$ $ $22,500\mathrm{.}00$ $ $18,900\mathrm{.}0035$ Advertising expense $ $48,000\mathrm{.}00$ $ $35,000\mathrm{.}00$ $ $55,000\mathrm{.}0036$ Loan from shareholder $ $93,450\mathrm{.}00$ $ $41,100\mathrm{.}00$ $ $35,500\mathrm{.}0037$ Accrued Liabilities $ $42,000\mathrm{.}00$ $ $35,000\mathrm{.}00$ $ $23,000\mathrm{.}0038$ Security deposit $ $5,000\mathrm{.}00$ $ $5,000\mathrm{.}00$ $ $5,000\mathrm{.}00$ Appendix IIProduct Modification Project $ $100,000\mathrm{.}00$ Expected benefits $4$ yearsIncremental Revenue Cost of MaintenanceYear$158,00020,100$year$253,00017,300$year$331,00014,200$year$440,50010,800$

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