Cash Flow and Financial Statements at Madry, Inc. Madry is a small company that manufactures and sells surfboards in Rodway. Mr. Michael, the founder of the company, is in charge of the design and sale of surfboards, but his background is in surfing, not business. As a result, the company's financial records are not well maintained. The initial investment in Madry inc. was provided by Michael and his friends and family. Because the initial investment was relatively small, and the company has made surfboards only for its own store, the investors haven't required detailed financial statements from Michael. But thanks to word of mouth among professional surfers, sales have picked up recently, and Michael is considering a major expansion. His plans include opening another surfboard store in Hawaii, as well as supplying his "sticks" (surfer lingo for boards) to other sellers. Michael's expansion plans require a significant investment, which he plans to finance with a combination of additional funds from outsiders plus some money borrowed from banks. Naturally, the new investors and creditors require more organized and detailed financial statements than Tad has previously prepared. At the urging of his investors, Michael has hired financial analyst Sara to evaluate the performance of the company over the past year. After rooting through old bank returns, and other records, Sara has assembled the following information

The company currently pays out 40 percent of net income as dividends to Michael and the other original investors, and it has a 30 percent tax rate. You are Sara's assistant, and she has asked you to explore the financial statements of the company reports to prepare the following

Part 1

1. An income statement for 2020 and 2021. (1.5marks )

2. A balance sheet for 2020 and 2021. (1.5marks )

3. Operating cash flow for each year.

4. Cash flow from assets for 2021.

5. Cash flow to creditors for 2021.

Part II

1. In light of your discussion in the previous question, Critically analyze what will be Michael's expansion plans.

2. How would you describe Sunset Boards' cash flows for 2021? Critically analyze the companys position.

\begin{tabular}{|lrr|} \hline & 2020 & 2021 \\ \hline Cost of goods sold & $306,726 & $387,290 \\ Cash & 44,261 & 66,870 \\ Depreciation & 86,590 & 97,871 \\ Interest expense & 18,824 & 21,576 \\ Selling and administrative & 60,322 & 78,732 \\ Accounts payable & 31,423 & 53,181 \\ Net fixed assets & 382,014 & 465,426 \\ Sales & 601,729 & 733,469 \\ Accounts receivable & 31,363 & 40,681 \\ Notes payable & 35,654 & 38,929 \\ Long-term debt & 192,827 & 210,408 \\ Inventory & 60,382 & 81,209 \\ New equity & 0 & 23,400 \\ \hline \end{tabular}