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Kim Possible Integrated Toys Ltd. Income Statement Year Ended December 31, 2009 Sales Cost of goods sold Gross margin Amortization Expense Operating Expense Income from operations Interest Revenue Interest Expense Income before taxes Income taxes Net income 49,000 195.000 2009 $858,000 513.000 345,000 53,000 244.000 184.000 101,000 4,000 24.000 81,000 33.000 $48,000 2008 $803,000 509.000 294,000 237.000 57,000 0 14.000 43,000 17.000 $26.000 Question 1 continued...) Kim Possible Integrated Toys Ltd. Balance Sheet December 31, 2009 Assets Cash Accounts receivable, net Inventories Prepaid insurance Long term investments Property, plant & Equipment Less: Accumulated amortization Liabilities Accounts payable Accrued liabilities Long term debt Shareholders equity Common shares Retained earnings Additional Information: a) b) 956,000 449.000 2009 $29,000 114,000 113,000 6.000 262,000 18,000 507,000 $787.000 $115,000 27,000 142,000 289,000 431.000 186,000 170.000 356,000 $787,000 799,000 2008 2007 $32,000 $32,000 85,000 92,000 111,000 101,000 8.000 8.000 236,000 233,000 9,000 9000 400,000 399.000 414.000 $644.000 $656.000 $95,000 $85,000 31,000 41,000 126,000 126,000 198,000 228,000 324.000 354.000 186,000 186,000 134,000 116.000 320,000 302,000 $644.000 $656.000 10,000 common shares issued and outstanding since December 31, 2005. Kim Possible purchases its entire inventory from Ron Stoppable Manufacturing Limited to be sold in its Florida stores. Information pertaining to question 1 Industry Averages Year Ended December 31, 2009 Current Quick / Acid - Test Debt Times Interest Earned These are the only industry averages that we can find in the market place Fishing .050 0.850 Food 2.300 1.500 1.350 0.400 0.840 0.500 2.900 2.500 Retail 0.640 2.800 Construction 1.250 0.600 0.720 3.620 Required: a. Complete and interpret the financial statement analysis of Kim Possible Integrated Toys Ltd. using financial ratios from our toolbox and the limited statistical information from other industries is provided and inserted into the spreadsheet attached. Complete all four sections of the analysis to the extent possible on excel spreadsheet provided (40 points) b. The Board of directors of Timon Inc. has approached you to prepare an analysis of Kim Possible Integrated Toys Ltd. Your clients represent all four of Kim Possible's stakeholder groups: short-term trade creditors; long- term creditors; shareholders; and the company managers. You are thinking about what each stakeholder group is looking for from your analysis. Write a brief memo about each stakeholder group. Include in your answer a brief discussion on what each group wants and which of the four aspects of financial analysis provides the best information for each of the stakeholder groups. (12 points) c. As a trade supplier, would you provide Kim Possible Integrated Toys Ltd. with a $20,000 line of credit? Discuss each ratios. (8 points) Kim Possible Integrated Toys Ltd. Income Statement Year Ended December 31, 2009 Sales Cost of goods sold Gross margin Amortization Expense Operating Expense Income from operations Interest Revenue Interest Expense Income before taxes Income taxes Net income 49,000 195.000 2009 $858,000 513.000 345,000 53,000 244.000 184.000 101,000 4,000 24.000 81,000 33.000 $48,000 2008 $803,000 509.000 294,000 237.000 57,000 0 14.000 43,000 17.000 $26.000 Question 1 continued...) Kim Possible Integrated Toys Ltd. Balance Sheet December 31, 2009 Assets Cash Accounts receivable, net Inventories Prepaid insurance Long term investments Property, plant & Equipment Less: Accumulated amortization Liabilities Accounts payable Accrued liabilities Long term debt Shareholders equity Common shares Retained earnings Additional Information: a) b) 956,000 449.000 2009 $29,000 114,000 113,000 6.000 262,000 18,000 507,000 $787.000 $115,000 27,000 142,000 289,000 431.000 186,000 170.000 356,000 $787,000 799,000 2008 2007 $32,000 $32,000 85,000 92,000 111,000 101,000 8.000 8.000 236,000 233,000 9,000 9000 400,000 399.000 414.000 $644.000 $656.000 $95,000 $85,000 31,000 41,000 126,000 126,000 198,000 228,000 324.000 354.000 186,000 186,000 134,000 116.000 320,000 302,000 $644.000 $656.000 10,000 common shares issued and outstanding since December 31, 2005. Kim Possible purchases its entire inventory from Ron Stoppable Manufacturing Limited to be sold in its Florida stores. Information pertaining to question 1 Industry Averages Year Ended December 31, 2009 Current Quick / Acid - Test Debt Times Interest Earned These are the only industry averages that we can find in the market place Fishing .050 0.850 Food 2.300 1.500 1.350 0.400 0.840 0.500 2.900 2.500 Retail 0.640 2.800 Construction 1.250 0.600 0.720 3.620 Required: a. Complete and interpret the financial statement analysis of Kim Possible Integrated Toys Ltd. using financial ratios from our toolbox and the limited statistical information from other industries is provided and inserted into the spreadsheet attached. Complete all four sections of the analysis to the extent possible on excel spreadsheet provided (40 points) b. The Board of directors of Timon Inc. has approached you to prepare an analysis of Kim Possible Integrated Toys Ltd. Your clients represent all four of Kim Possible's stakeholder groups: short-term trade creditors; long- term creditors; shareholders; and the company managers. You are thinking about what each stakeholder group is looking for from your analysis. Write a brief memo about each stakeholder group. Include in your answer a brief discussion on what each group wants and which of the four aspects of financial analysis provides the best information for each of the stakeholder groups. (12 points) c. As a trade supplier, would you provide Kim Possible Integrated Toys Ltd. with a $20,000 line of credit? Discuss each ratios. (8 points)