CHAPTER CASE CASH FLOWS AND FINANCIAL STATEMENTS AT SUNSET BOARDS, INC 5 unset Boards is a small company that manufac- tures and sells surfboards in Malilbu. Tad Marks. charge of the design and sale of the surfboards, but his background is in surfing, not business. As a result, the company's f- 2014 the founder of the company, is in Cost of goods sold Cash $169,969 $214,607 24,524 26,056 47,980 54,230 10,442 11,954 33,425 43,626 Depreciation Interest expense Selling & administrative nancial records are not well maintained. The initial investment in Sunset Boards was pro- vided by Tad and his friends and family. Because the Accounts payable initial investment was relatively small, and the has made surfboards only for its own store, the inves- Sales tors haven't required detailed financial statements from Accounts receivable 43,344 48,090 211,680 264,021 333,426 406,427 company Net fixed assets 17,378 22,542 Notes payable Long-term debt 9,757 21,571 Tad. But thanks to word of mouth among professional 106,848 119,976 surfers, sales have picked up recently, and Tad is con-Inven 36,570 50,185 0 20,160 sidering a major expansion. His plans include opening another surflboard store in Hawai, as well as supplying New equity his "sticks" (surfer lingo for boards) to other sellers. Tad's expansion plans require a significant in- vestment, which he plans to finance with a combi- nation of additional funds from outsiders plus some Sunset Boards currently pays out 50 percent of net income as dividends to Tad and the other origi- nal investors, and has a 20 percent tax rate. You are m banks. Naturally, the new in- Paula's assistant, and she has asked you to prepare the following: vestors and creditors require more organized and detailed financial statements than Tad has previously 1. An income statement for 2013 and 2014. prepared. At the urging of his investors, Tad has hired 2. A balance sheet for 2013 and 2014 financial analyst Paula Wolfe to evaluate the perfor- 3. Operating cash flow for each year. mance of the company over the past year 4. Cash flow from assets for 2014 tox rotuurme andother reeorde Pauda has as-5. Cash flow to creditors for 2014. After rooting through old bank statements, sales sembled the following information: 6. Cash flow to stockholders for 2014. QUESTIONS 2. In light of your discussion in the previous question, what do you think about Tad's expansion plans? 1. How would you describe Sunset Boards' cash flows for 2014? Write a brief discussion
