Cloud 9 co. is an Irish sports shoes manufacturer. It has recently seen a decline in profitability owing to covid 19.

1. trading profit and loss account and balance sheet, 31st March 2021

2. Forecast trading profit and loss for the six months ended 30th september 2021, in contribution form

3. cash forecast for the 6 months ended 30th september 2021

4. evaluation of cloud 9's liquidity position amd reccomendations to improve it.

CLOUD 9 COMPANY CASE STUDY (75 marks) Cloud 9 Co. is an Irish sports shoes manufacturer. It has recently seen a decline in profitability owing to Covid 19. As a result, Cloud 9 is faced with having to suspend its operations immediately unless it can find alternative markets to ensure the business can remain operational. The window to implement a new plan is very tight. Luckily, the production and sales directors had already assembled a team to devise a plan, referred to as 'Go Online,' to diversify the business away from its reliance on the direct retail market. While much of the outline of Go Online is ready, it still requires input from the finance department. Although the team had intended to present Go Online at a strategy conference planned for later this year, events have now overtaken them and an emergency meeting of Cloud 9's senior management team has been called for next week. The principle agenda items are an assessment of the current level of stress on the firm's liquidity and a discussion of the proposed Go Online which, it is hoped, can go into production quickly. To assist with these discussions, you are required to prepare a financial report package for the meeting regarding Cloud 9's current liquidity condition and the expected financial implications of the Go Online proposal under consideration. Your report package must include the following: 1. Trading, profit and loss account and balance sheet, 31st March 2021 (20 m) 2. Forecast trading profit and loss for the six months ended 30 September 2021, in contribution form. (20 m) 3. Cash forecast for the six months ended 30th September 2021. (20 m) 4. Evaluation of Cloud 9's liquidity position and recommendations to improve it.(15 m) . . lon 69 mill . You have ascertained the following information to assist with your assessment: Cloud 9 is registered for VAT and charges 23% VAT on its sales. VAT returns are submitted on-line following the end of each (calendar) two monthly period and payment is made by the 23rd of the relevant month. Janlfeb ~ 23rd Marcon ma/Apr 23rd May Ignore taxation other than VAT. A loan of 69,000,000 was taken out with Irish Bank plc on 14 Apr 2015 and is repayable in full on 1 Apr 2025. The interest rate on the loan is 10% per annum, payable quarterly on 14 January, 18 April, 1st July and 1 Oct each year. All Cloud 9's sales and purchases are on 30-day credit terms. All other expenses are paid immediately on receipt of invoice. Cloud 9 depreciates it's property, plant & equipment on a straight-line basis as follows: Buildings 40 years o Machinery 20 years Delivery vans 5 years Fixtures & fittings 10 years Office furniture & equipment 10 years The following appendices are included: Appendix 1: Trial balance extracted from Cloud 9's records @31st March 2021. o Appendix 2: Details of Go Online's new manufacturing line and financial projections for the six months from 14 April 2021 to 30th September 2021 Appendix 3: Abridged financial statements for two previous years to 31st March 2020 and 2019. O O o 0 O Please note that whilst your report package is to include specified statements and reports, it is necessary to include all relevant data and conclusions into the financial assessment to ensure that the full economic impact is considered. 6000 6000 50,000 206,655 69.000 100,000 25.000 85,000 12,750 18.500 7,400 14,000 4,200 13.500 5400 Appendix 1 - Trtal Balance 31st March 2021 Trial Balance as at 31st March 2021 Share capital Retained earnings 31 March 2020 Loan Building (cost) Building accumulated depredation 31st Mar 2020 Machinery (cost) Machinery accumulated depreciation 31st Mar 2020 Delivery vans (cost) Delivery vans accumulated depreciation 31st Mar 2020 Fixtures & fittings (cost) Fixtures & fittings accumulated depreciation 31st Mar 2020 office furniture & equipment (cost) Office furniture & equipment accumulated depreciation 31st Mar 2020 Inventory 14 April 2020 opening so Trade receivables Bank overdraft Trade payables VAT payable - due to reverwe, 114 Sales revenue Purchases Wages and salaries Light and heat Selling expenses Advertising Client entertainment Legal and professional fees Maintenance and repairs Motor expenses Office expenses Interest expense (-250) 147.500 87,300 15,950 45,700 6,220 370,000 248,750 62,500 7,250 6,500 3,000 2,750 1.500 4.800 6,500 3,750 5,175 818,275 818,275 . 150,000 (vannak dow) On 31st March 2021 the following expenses had not been accounted for. Cloud 9 plans to pay the outstanding amounts in April 2021. o Wages - overtime for March 2021 3,200,000 Petrol for delivery vans (Inclusive of VAT 13.5%) Legal fees (inclusive of VAT 23%) 1,230,000 (var 230.000) Inventory on hand @31st March 2021 is valued at 171,250,000 coing site) Amounts due from trade receivables at 31st March 2021 are expected to be received 50% in April and remainder in May. CASH BUDGET Amounts due to trade payables at 31st March 2021 are expected to be paid in full in April. CASH . Buocer The sales volume required to meet the profit target will be achieved incrementally as follows: Month Apr 10% May 10% Jun 10% Jul 10% Aug 20% Sept 40% (For example Apr sales will be 10% of the annual sales) Expected sales mix per month is expected to be 70% directly to the public via on-line cash sales in Cloud 9's existing on-line store and 30% credit sales on 30 day credit to retail outlets. It is expected that 50% of credit sales receipts will be received in the month following the sale with the remaining 50% received the following month. Inventory on hand @ 31st March 2021 cannot be used in the new product line. Material for the new production line will be bought in at the start of each month in the required amount to meet that month's sales. No inventory of material will be held. All material will be purchased on 30 day credit and paid for in the month following purchase. All operating expenses will be paid in the month incurred. Endorsement fees will accrue over the six months and be paid 50% payable June and the remainder in September. No new investment in machinery or equipment is required for the next 6 months. Appendix 3 - Abridged Financial Statements Income statement for year ended 31 March Sales revenue Less: Cost of goods sold Gross profit Less expenses Profit for the year 2020 000 456,870 (295,900) 160,970 (117,160) 43,810 2019 000 491,677 (323,551) 168,126 (113,936) 54,190 Balance sheet as at 31 March Non Current Assets Property, plant & equipment 2020 6000 176,250 2019 000 135,870 Current assets Inventories Trade receivables Bank 147,500 80,350 2.950 230,800 407,050 152,480 70,690 29.460 252,630 388,500 Total current assets Total assets 50,000 206,655 256,655 50,000 162,845 212,845 69,000 69,000 Equity and liabilities Share capital Retained earnings Total equity Non-current liabilities Loan Current liabilities Trade payables VAT Accrued expenses Total current liabilities Total liabilities Total equity and liabilities 43,205 32,960 5,230 81,395 150,395 407,050 75,465 26,320 4,870 106,655 175,655 388,500 BEU Template for Cloud 9 Case Sady? Home Insert Draw Page Layout Formula bata Review View Tell me A cu Cabrio 1AA Custom 1 Wrap Mere B HE 969 21 Condom Formatting Det 115 1 D Forecast trading profit and loss account by month for 6 months ended 30th September 2021, contribution format Apr May Jun Jul Aug Sept Total + Sales units Selling price per unit Sales revenue Less Direct variable costs Materiale per unit 10 Materials cast 11 Labour per unit u Labour coste 1) Tutal variable cost 1 Contribution US 11 Les fixed costs 1 Admin/sales salaries 11 Lightheat 15 Selling expenses 20 Advertising Maintenance/repairs 2 Motor/petrol exps Office expenses 2 Depreciation Loan interest Endorsement des 77 Total fixed Working for forecast trading profit and loss account D Calibri (Body 12 ' ' X Cut ( Copy ~ Format General Paste 2 Wrap Test Merge Centre B IU % 9 Cong Form E25 Xfx A 19 20 Balance sheet as at 31st March 2021 21 22 Non-current assets 22 Property, plant & equipment 24 Current assets 25 Inventories 25 Trade receivables 27 Total current assets 28 Total assets 29 30 Equity and liabilities 21 Share capital 32 Retained earnings 33 Total equity 34 Non-current liabilities 35 Loan 26 Current liabilities 37 Bank overdraft 38 Trade payables 39 VAT payable 40 Accrued expenses 41 Total current liabilities 42 Total liabilities 23 Balance sheet as at 31st March 2021 45 Workings for trading profit and loss account and balance sheets con 45 47 19 Format 11 12 Marge & Centre % 9 8-18 Conditions Formatting 19 8 D E G Ratio analysis 2019 2020 2021 Current ratio 5 7 Quick ratio 9 Receivables days 10 11 12 Payables days 11 Debt to equity 14 15 16 Commentary 19 21 CLOUD 9 COMPANY CASE STUDY (75 marks) Cloud 9 Co. is an Irish sports shoes manufacturer. It has recently seen a decline in profitability owing to Covid 19. As a result, Cloud 9 is faced with having to suspend its operations immediately unless it can find alternative markets to ensure the business can remain operational. The window to implement a new plan is very tight. Luckily, the production and sales directors had already assembled a team to devise a plan, referred to as 'Go Online,' to diversify the business away from its reliance on the direct retail market. While much of the outline of Go Online is ready, it still requires input from the finance department. Although the team had intended to present Go Online at a strategy conference planned for later this year, events have now overtaken them and an emergency meeting of Cloud 9's senior management team has been called for next week. The principle agenda items are an assessment of the current level of stress on the firm's liquidity and a discussion of the proposed Go Online which, it is hoped, can go into production quickly. To assist with these discussions, you are required to prepare a financial report package for the meeting regarding Cloud 9's current liquidity condition and the expected financial implications of the Go Online proposal under consideration. Your report package must include the following: 1. Trading, profit and loss account and balance sheet, 31st March 2021 (20 m) 2. Forecast trading profit and loss for the six months ended 30 September 2021, in contribution form. (20 m) 3. Cash forecast for the six months ended 30th September 2021. (20 m) 4. Evaluation of Cloud 9's liquidity position and recommendations to improve it.(15 m) . . lon 69 mill . You have ascertained the following information to assist with your assessment: Cloud 9 is registered for VAT and charges 23% VAT on its sales. VAT returns are submitted on-line following the end of each (calendar) two monthly period and payment is made by the 23rd of the relevant month. Janlfeb ~ 23rd Marcon ma/Apr 23rd May Ignore taxation other than VAT. A loan of 69,000,000 was taken out with Irish Bank plc on 14 Apr 2015 and is repayable in full on 1 Apr 2025. The interest rate on the loan is 10% per annum, payable quarterly on 14 January, 18 April, 1st July and 1 Oct each year. All Cloud 9's sales and purchases are on 30-day credit terms. All other expenses are paid immediately on receipt of invoice. Cloud 9 depreciates it's property, plant & equipment on a straight-line basis as follows: Buildings 40 years o Machinery 20 years Delivery vans 5 years Fixtures & fittings 10 years Office furniture & equipment 10 years The following appendices are included: Appendix 1: Trial balance extracted from Cloud 9's records @31st March 2021. o Appendix 2: Details of Go Online's new manufacturing line and financial projections for the six months from 14 April 2021 to 30th September 2021 Appendix 3: Abridged financial statements for two previous years to 31st March 2020 and 2019. O O o 0 O Please note that whilst your report package is to include specified statements and reports, it is necessary to include all relevant data and conclusions into the financial assessment to ensure that the full economic impact is considered. 6000 6000 50,000 206,655 69.000 100,000 25.000 85,000 12,750 18.500 7,400 14,000 4,200 13.500 5400 Appendix 1 - Trtal Balance 31st March 2021 Trial Balance as at 31st March 2021 Share capital Retained earnings 31 March 2020 Loan Building (cost) Building accumulated depredation 31st Mar 2020 Machinery (cost) Machinery accumulated depreciation 31st Mar 2020 Delivery vans (cost) Delivery vans accumulated depreciation 31st Mar 2020 Fixtures & fittings (cost) Fixtures & fittings accumulated depreciation 31st Mar 2020 office furniture & equipment (cost) Office furniture & equipment accumulated depreciation 31st Mar 2020 Inventory 14 April 2020 opening so Trade receivables Bank overdraft Trade payables VAT payable - due to reverwe, 114 Sales revenue Purchases Wages and salaries Light and heat Selling expenses Advertising Client entertainment Legal and professional fees Maintenance and repairs Motor expenses Office expenses Interest expense (-250) 147.500 87,300 15,950 45,700 6,220 370,000 248,750 62,500 7,250 6,500 3,000 2,750 1.500 4.800 6,500 3,750 5,175 818,275 818,275 . 150,000 (vannak dow) On 31st March 2021 the following expenses had not been accounted for. Cloud 9 plans to pay the outstanding amounts in April 2021. o Wages - overtime for March 2021 3,200,000 Petrol for delivery vans (Inclusive of VAT 13.5%) Legal fees (inclusive of VAT 23%) 1,230,000 (var 230.000) Inventory on hand @31st March 2021 is valued at 171,250,000 coing site) Amounts due from trade receivables at 31st March 2021 are expected to be received 50% in April and remainder in May. CASH BUDGET Amounts due to trade payables at 31st March 2021 are expected to be paid in full in April. CASH . Buocer The sales volume required to meet the profit target will be achieved incrementally as follows: Month Apr 10% May 10% Jun 10% Jul 10% Aug 20% Sept 40% (For example Apr sales will be 10% of the annual sales) Expected sales mix per month is expected to be 70% directly to the public via on-line cash sales in Cloud 9's existing on-line store and 30% credit sales on 30 day credit to retail outlets. It is expected that 50% of credit sales receipts will be received in the month following the sale with the remaining 50% received the following month. Inventory on hand @ 31st March 2021 cannot be used in the new product line. Material for the new production line will be bought in at the start of each month in the required amount to meet that month's sales. No inventory of material will be held. All material will be purchased on 30 day credit and paid for in the month following purchase. All operating expenses will be paid in the month incurred. Endorsement fees will accrue over the six months and be paid 50% payable June and the remainder in September. No new investment in machinery or equipment is required for the next 6 months. Appendix 3 - Abridged Financial Statements Income statement for year ended 31 March Sales revenue Less: Cost of goods sold Gross profit Less expenses Profit for the year 2020 000 456,870 (295,900) 160,970 (117,160) 43,810 2019 000 491,677 (323,551) 168,126 (113,936) 54,190 Balance sheet as at 31 March Non Current Assets Property, plant & equipment 2020 6000 176,250 2019 000 135,870 Current assets Inventories Trade receivables Bank 147,500 80,350 2.950 230,800 407,050 152,480 70,690 29.460 252,630 388,500 Total current assets Total assets 50,000 206,655 256,655 50,000 162,845 212,845 69,000 69,000 Equity and liabilities Share capital Retained earnings Total equity Non-current liabilities Loan Current liabilities Trade payables VAT Accrued expenses Total current liabilities Total liabilities Total equity and liabilities 43,205 32,960 5,230 81,395 150,395 407,050 75,465 26,320 4,870 106,655 175,655 388,500 BEU Template for Cloud 9 Case Sady? Home Insert Draw Page Layout Formula bata Review View Tell me A cu Cabrio 1AA Custom 1 Wrap Mere B HE 969 21 Condom Formatting Det 115 1 D Forecast trading profit and loss account by month for 6 months ended 30th September 2021, contribution format Apr May Jun Jul Aug Sept Total + Sales units Selling price per unit Sales revenue Less Direct variable costs Materiale per unit 10 Materials cast 11 Labour per unit u Labour coste 1) Tutal variable cost 1 Contribution US 11 Les fixed costs 1 Admin/sales salaries 11 Lightheat 15 Selling expenses 20 Advertising Maintenance/repairs 2 Motor/petrol exps Office expenses 2 Depreciation Loan interest Endorsement des 77 Total fixed Working for forecast trading profit and loss account D Calibri (Body 12 ' ' X Cut ( Copy ~ Format General Paste 2 Wrap Test Merge Centre B IU % 9 Cong Form E25 Xfx A 19 20 Balance sheet as at 31st March 2021 21 22 Non-current assets 22 Property, plant & equipment 24 Current assets 25 Inventories 25 Trade receivables 27 Total current assets 28 Total assets 29 30 Equity and liabilities 21 Share capital 32 Retained earnings 33 Total equity 34 Non-current liabilities 35 Loan 26 Current liabilities 37 Bank overdraft 38 Trade payables 39 VAT payable 40 Accrued expenses 41 Total current liabilities 42 Total liabilities 23 Balance sheet as at 31st March 2021 45 Workings for trading profit and loss account and balance sheets con 45 47 19 Format 11 12 Marge & Centre % 9 8-18 Conditions Formatting 19 8 D E G Ratio analysis 2019 2020 2021 Current ratio 5 7 Quick ratio 9 Receivables days 10 11 12 Payables days 11 Debt to equity 14 15 16 Commentary 19 21