| Financial Information - Cape Breton Beverages Incorporated A few of your friends have heard that you have been studying financial statements in your S203: Accounting course and now consider you an expert on financial statement analysis. Your friend Sim has just been promoted to Chief Executive Officer of Cape Breton Beverages Incorporated (CBB) which is a private corporation, Since Jim is new to this management role, he is concerned about the financial performance of CBB over the past few years and has provided you with the selected information. Jim has not provided you with a full set of financial statements, only the income statement and balance sheet as he believes that is all you will need for your analysis Question 1 Sim has a meeting with a bank tomorrow to inquire about obtaining a short-term loan to expand his operations in 2022. Based on your knowledge, Sim asks you to assess the liquidity of his company, and more specifically if you believe the bank will grant his company the loan (30 points) Recommended time to complete Question 1 ls 30 minutes. a Question 2 Jim is so impressed with your liquidity analysis that he also asks you to assess the profitability of his company, and more specifically if you believe CBBL is profitable or unprofitable. (30 points) Recommended time to complete Question 2 i 30 minutes. Cape Breton Beverages Incorporated Comparative Income Statement (in thousands) For the year ended September 30, 2021 Cape Breton Beverages Incorporated Comparative Income Statement (in thousands) For the year ended September 30, 2021 2021 2020 $12,600 Net Sales $25,200 9,800 Cost of Goods Sold 5,200 Gross Profit 15,400 7,400 4.300 11,100 2.500 4.900 100 250 Operating Expenses Operating Income Interest Expense Income Before Income Tax Income Tax Expense Net Income 10,850 4,800 900 400 $9.950 54.400 Cape Breton Beverages Incorporated Comparative Balance Sheet (in thousands) September 30, 2021 2021 2020 Assets Current Assets: Cash $ 4,000 $ 1,200 400 600 2.000 1.100 4.000 2.100 2000 900 Marketable Securities Accounts Receivable net Inventory Supplies Prepaid Expenses Total Current Assets Property, Plant and Equipment net Total Assets 1.200 900 13.300 20.700 7.100 19,800 $ 26,900 $ 34,000 Liabilities & Shareholder's Equity Liabilities: Accounts Payable $4,200 $ 2.100 Liabilities & Shareholder's Equity Liabilities: $ 4,200 $ 2.100 4,500 2.300 8,700 4,400 6,800 9,000 15,500 13,400 Accounts Payable Note Payable Total Current Liabilities Long Term Liabilities Total Liabilities Shareholder's Equity Retained Earnings Capital Stock Total Shareholder's Equity Total Liabilities & Shareholder's Equity 8,500 3,500 10,000 10,000 18.500 13,500 $ 34,000 $ 26,900 Additional Information: Note: Credit terms for Accounts Receivable are 30 days for CBBI. Inventories at September 30, 2019 were $828. Accounts Receivable, net at September 30, 2019 were $250. Property. Plant & Equipment net at September 30, 2019 were $18.560. Accounts Payable at September 30, 2019 were $1,844. Additional Information: Note: Credit terms for Accounts Receivable are 30 days for CBBI. Inventories at September 30, 2019 were $828. Accounts Receivable, net at September 30, 2019 were $250. Property, Plant, & Equipment net at September 30, 2019 were $18,560. Accounts Payable at September 30, 2019 were $1,844. Total Shareholder's Equity at September 30, 2019 were $16,400. Common shares outstanding remained at 10,000 since 2017. Beverage Industry Ratios Gross Profit Rate 50% Debt to Assets 45% 35% Return on Equity Days to sell inventory Net Proft Margin 100 days 25% Current ratio 1.75 to 1 $0.50 Earnings per share Days to collect 20 days Book Value Per Share $1
