[Cash Burn and Build] Following are two years of income statements and balance

sheets for the Munich Exports Corporation.

MUNICH EXPORTS CORPORATION

BALANCE SHEET

Cash Accounts receivable Inventories 450,000

2009

2010

$ 50,000 300,000 570,000 920,000 380,000 $1,300,000

$ 50,000 200,000

Total current assets Fixed assets, net

Total assets

700,000

300,000 $1,000,000

BALANCE SHEET

Accounts payable Accruals Bank loan

Total current liabilities Long-term debt Common stock ($0.05 par) Additional paid-in-capital Retained earnings

Total liabilities and equity

Income Statement Net sales Cost of goods sold

Gross profit Marketing

General and administrative Depreciation

EBIT Interest

Earnings before taxes Income taxes (40% rate)

Net income

$

2009

130,000 50,000 90,000

$

2010

180,000 70,000 90,000

Chapter 5: Evaluating Financial Performance 181

270,000 400,000 50,000 200,000 80,000 $1,000,000

2009

340,000 550,000 50,000 200,000 160,000 $1,300,000

2010

$1,600,000 960,000 640,000 160,000 150,000 55,000 275,000 55,000 220,000 88,000 132,000

$1,300,000 780,000 520,000 130,000 150,000 40,000 200,000 45,000 155,000 62,000 93,000

Calculate the cash build, cash burn, and net cash burn or build for Munich Ex- ports in 2010.

Assume that 2011 will be a repeat of 2010. If your answer in Part A resulted in a net cash burn position, calculate the net cash burn monthly rate and indicate the number of months remaining until out of cash. If your answer in Part A re- sulted in a net cash build position, calculate the net cash build monthly rate and indicate the expected cash balance at the end of 2011.