Cash Flows and Financial Statements at Sunset Boards, Inc.

Sunset Boards is a small company that manufactures and sells surfboards in Malibu. Tad Marks, the founder of the company, is in charge of the design and sale of the 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 Sunset Boards was provided by Tad 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 Tad. But thanks to word of mouth among professional surfers, sales have picked up recently, and Tad 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.

Tad'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, Tad has hired financial analyst Christina Wolfe to evaluate the performance of the company over the past year.

After rooting through old bank statements, sales receipts, tax returns, and other records, Christina has assembled the following information:

Sunset Boards currently pays out 40 percent of net income as dividends to Tad and the other original investors, and it has a 30 percent tax rate. You are Christina's assistant, and she has asked you to prepare the following:

1. An income statement for 2014 and 2015.
2. A balance sheet for 2014 and 2015.
3. Operating cash flow for each year.
4. Cash flow from assets for 2015.
5. Cash flow to creditors for 2015.
6. Cash flow to stockholders for 2015.
7. QUESTIONS
   

Minicase Chapter 2 2014 Balance Sheet Assets: Cash Accounts Receivable Inventory Net Assets Total Assets Liabilities Accounts Payable Notes Payable Long Term Debt Total Liabilities Equity Stock & RE Total Equity Total Liab & Equity 28,372 20,104 38,706 244,881 332,063.00 20,143 22,855 2015 42,865 26,078 52,057 298,350 419,350.00 123,607 166,605.00 34,091 24,955 140,000 199,046.00 165,458.00 165,458.00 332,063.00 205,304.00 205,304.00 404,350.00 Equity Summary 2015: Beg Balance New Equity Net Income Dividends End Balance 165,458.00 66,409.70 (26,563.70) 205,304.00 2015 Net Income Sales COGS Gross Margin Selling & Admin Depreciation EBIT Interest Net Income Taxes NI after Tax Dividends Operating Cash Flow Earn Before Int & Tax Taxes Depreciation Operating Cash Flow 385,724 196,619 189,105.00 38,668 55,506 94,931.00 12,067 82,864.00 24,859.20 58,004.80 23,201.92 470,172 248,263 221,909.00 50,469 62,738 108,702.00 13,831 94,871.00 28,461.30 66,409.70 26,563.70 Cash Flow from Assets: OCF Capital Spending Change in NWC Cash Flow from Assets 142,978.70 116,207.00 17,770.00 9,001.70 Cash Flow to Creditors Interest Paid - Net new Borrowing Cash flow to Creditors 13,831.00 (16,393.00) (2,562.00) 94,931.00 (24,859.20) 55,506.00 125,577.80 108,702.00 (28,461.30) 62,738.00 142,978.70 Cash Flow to Stockholders Dividends Paid - Net new Equity Raised Cash flow to Stockholders 26,563.70 26,563.70 Calcuations not needed from students but needed to complete Cash Flow from Assets: Net Captial Spending Ending Net Fixed Assets - Beg Net Fixed Assets + Depreciation 298,350.00 (244,881.00) 62,738.00 Change in NWC End NWC Beg NWC Change in NWC 61,954.00 (44,184.00) 17,770.00 Captial Spending 116,207.00