Chapter 5: Evaluating Operating and Financial Performance 191 MINICASE Scandi Home Furnishings, Inc. Kaj Rasmussen founded Scandi Home Furnishings as a corporation during mid-2013. Sales during the first full year (2014) of operation reached $1.3 million. Sales increased by 15 percent in 2015 and another 20 percent in 2016. ncreasing in 2015 over 2014, profits fell sharply in 2016, causing Kaj to wonder what was happening to his "pride-and- joy" business venture. After all, Kaj worked as closely as possible to a 24/7 pace, beginning with the startup of Scandi and continuing through the first three full years of operation. Scandi Home Funishings, located in eastern North Carolina, designs, manufactures, and sells Scandinavian-designed furniture and accessories to home furnishings retailers. The modern Scandinavian design has a streamlined and unclut- tered look. While this furniture style is primarily associated with Denmark, both Norwegian and Swedish designers have contributed to the allure of Scandinavian home furnishings. Some say that the inspiration for the Scandinavian design can be traced to the elegant curves of art nouveau from which designers were able to produce aesthetically pleasing structurally strong moden furniture. Danish fumishings and the home furnishings produced by other Scandinavian countries-Sweden, Norway, and Finland-are made using wood (primarily oak, maple, and ash, aluminum, steel, and high-grade plastics Kaj grew up in Copenhagen, Denmark, and received an undergraduate degree f from a technical university in Sweden As is typical in Europe, Kaj began his business career as an apprentice at a major home furnishings Copenhagen. After leaming the trade, he quickly moved into a management position in the firm. However, after a few years, Kaj realized that what he really wanted to do was to start an business. At the same time, after travelling throughout the world, he was sure that he wanted to be an entrepreneur in the United States. Kaj moved to the United States in early 2013. With $140,000 of his personal assets and $210,000 from venture investors, he began operations in mid-2013. Kaj, with a 40 percent ownership management expertise, was allowed to operate the venture in a way that he thought was best for Scandi. Four years later, Kaj is sure he did the right thing manufacturer in d operate his own Scandinavian home furnishings interest and industry-related Following are the three years of income statements and balance sheets for Scandi Home Furnishings. Kaj felt that he would need to continue to expand sales to maintain a competitive advantage. After first concentrating on selling Scandinavian home furnishings in the Northeast in 2014 and 2015, he decided to enter the West Coast market. An in- crease in expenses occurred associated with identifying, contacting, and selling to home furnishings retailers in Califomia Oregon, and Washington. Kaj Rasmussen hopes that you can help Scandi Home Furnishings from both operating and financial standpoints SCANDI HOME FURNISHINGS, INC INCOME STATEMENTS Net sales Cost of goods sold 2016 $1.300,000 780,000 520,000 130,000 150,000 40,000 200,000 45,000 155,000 62000 $1,500,000 $1,800,000 00000 1,260,000 540,000 200,000 200,000 50.000 80,000 Gross profit Marketing General and administrative 600,000 150,000 150,000 53,000 247,000 57,000 190,000 76,000 EBIT Earnings before taxes Net income 70,000 Income taxes (40%) 4000 Cash Dividends S 74000 continued on next page) Chapter 5: Evaluating Operating and Financial Performance 191 MINICASE Scandi Home Furnishings, Inc. Kaj Rasmussen founded Scandi Home Furnishings as a corporation during mid-2013. Sales during the first full year (2014) of operation reached $1.3 million. Sales increased by 15 percent in 2015 and another 20 percent in 2016. ncreasing in 2015 over 2014, profits fell sharply in 2016, causing Kaj to wonder what was happening to his "pride-and- joy" business venture. After all, Kaj worked as closely as possible to a 24/7 pace, beginning with the startup of Scandi and continuing through the first three full years of operation. Scandi Home Funishings, located in eastern North Carolina, designs, manufactures, and sells Scandinavian-designed furniture and accessories to home furnishings retailers. The modern Scandinavian design has a streamlined and unclut- tered look. While this furniture style is primarily associated with Denmark, both Norwegian and Swedish designers have contributed to the allure of Scandinavian home furnishings. Some say that the inspiration for the Scandinavian design can be traced to the elegant curves of art nouveau from which designers were able to produce aesthetically pleasing structurally strong moden furniture. Danish fumishings and the home furnishings produced by other Scandinavian countries-Sweden, Norway, and Finland-are made using wood (primarily oak, maple, and ash, aluminum, steel, and high-grade plastics Kaj grew up in Copenhagen, Denmark, and received an undergraduate degree f from a technical university in Sweden As is typical in Europe, Kaj began his business career as an apprentice at a major home furnishings Copenhagen. After leaming the trade, he quickly moved into a management position in the firm. However, after a few years, Kaj realized that what he really wanted to do was to start an business. At the same time, after travelling throughout the world, he was sure that he wanted to be an entrepreneur in the United States. Kaj moved to the United States in early 2013. With $140,000 of his personal assets and $210,000 from venture investors, he began operations in mid-2013. Kaj, with a 40 percent ownership management expertise, was allowed to operate the venture in a way that he thought was best for Scandi. Four years later, Kaj is sure he did the right thing manufacturer in d operate his own Scandinavian home furnishings interest and industry-related Following are the three years of income statements and balance sheets for Scandi Home Furnishings. Kaj felt that he would need to continue to expand sales to maintain a competitive advantage. After first concentrating on selling Scandinavian home furnishings in the Northeast in 2014 and 2015, he decided to enter the West Coast market. An in- crease in expenses occurred associated with identifying, contacting, and selling to home furnishings retailers in Califomia Oregon, and Washington. Kaj Rasmussen hopes that you can help Scandi Home Furnishings from both operating and financial standpoints SCANDI HOME FURNISHINGS, INC INCOME STATEMENTS Net sales Cost of goods sold 2016 $1.300,000 780,000 520,000 130,000 150,000 40,000 200,000 45,000 155,000 62000 $1,500,000 $1,800,000 00000 1,260,000 540,000 200,000 200,000 50.000 80,000 Gross profit Marketing General and administrative 600,000 150,000 150,000 53,000 247,000 57,000 190,000 76,000 EBIT Earnings before taxes Net income 70,000 Income taxes (40%) 4000 Cash Dividends S 74000 continued on next page)