I need help with PART A and B. I will rate it if its right. Thank you in advance.
MINICASE Scandi Home Furnishings, Inc. Kaj Rasmussen founded Scandi Home Furnishings as a corporation during mid-2013. Sales during the first to your 2014 of operation reached $1.3 million Sales increased by 15 percent in 2015 and another 20 percent in 2016. However, the increasing in 2015 over 2014, profits fell sharply in 2016, causing Kaj to wonder what was happening to his pride and jay' 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 Furnishings, located in easter North Carolina, design, manufactures, and sells Scandinavian designed furniture and accessories to home furnishings retailers. The modern Scandinavian design has a streamlined and uncut- tered look. While this furniture style is primarily associated with Denmark, both Norwegion 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 modern furniture, Danish furnishings and the home furnishings produced by other Scandinavian countries-Sweden, Norway, and Finland -are made using wood (primarily ook, maple, and ashl aluminum, steel, and high-grade plastics. Kaj grew up in Copenhagen, Denmark, and received an undergraduate degree from a technical university in Sweden. As is typical in Europe, Kaj bogan his business career as an apprentice at a major home furnishings manufacturer in Copenhagen. After learning the trade, he quickly moved into a management position in the fim. However, after a few (continued on next page) Scandi Home Furnishings, Inc. (Continued) years, Kaj realized that what he really wanted to do was to start and operate his own Scandinavian home furnishing 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 interest and industry-related 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. Following are the three years of income statements and balance sheets for Scandi Home Furnishings. Kaj felt that that he would need to continue to expand sales to maintain a competitive advantage. After first concentrating on selling Scan. dinavian home furnishings in the Northeast in 2014 and 2015, he decided to enter the West Coast market. An increase in expenses occurred associated with identifying. contacting, and selling to home furnishings retailers in California, Oregon, and Washington. Kaj Rasmussen hopes that you can help him better understand what has been happening to Scandi Home Furnishings from both operating and financial standpoints. SCANDI HOME FURNISHINGS, INC. 2015 2016 INCOME STATEMENTS $1,800,000 1.260,000 540,000 Net sales Cost of goods sold Gross profit Marketing General and administrative Depreciation EBIT Interest Earnings before taxes Income taxes (40%) Net income Cash Dividends 2014 $1.300.000 780,000 520,000 130,000 150,000 40.000 200,000 45,000 155,000 62,000 $ 93,000 $ 0 $1,500,000 900,000 600.000 150,000 150,000 53.000 247,000 57.000 190,000 76,000 $ 114,000 $ 74,000 200,000 200,000 60,000 80,000 70,000 10,000 4,000 $ 6,000 $ 0 SCANDI HOME FURNISHINGS, INC. 2014 BALANCE SHEETS 2015 2016 Cash Accounts receivable Inventories Total current assets Fixed assets, net Total assets $ 50.000 200,000 450,000 700,000 300,000 $1,000,000 $ 40,000 260,000 500,000 800,000 400.000 $1,200,000 $ 10,000 360,000 600,000 970,000 500.000 $1,470,000 Accounts payable Accruals Bank loan Total current liabilities Long-term debt Common stock Retained earnings Total liabilities and equity $ 130,000 50,000 90,000 270.000 300,000 350,000 80,000 $1,000,000 $ 170,000 70,000 90,000 330.000 400,000 350,000 120,000 $1,200,000 $ 180,000 80.000 184,000 444,000 550,000 350,000 126,000 $1,470,000 *350,000 shares of common stock were issued to Kaj Rasmussen and the venture investors when Scandi Home Furnishings, Inc. (Continued) A. An analysis of the cash conversion cycle should also help Kaj understand what has been happening to the operations of Scandi. Prepare an analysis of the average conversion periods for the three components of the cash conversion cycle for 2014-2015 and 20152016. Explain what has happened in terms of each component of the cycle B. Kaj has been able to obtain some industry ratio data from the home furnishings industry trade association to which he belongs. The industry association collects proprietary financial information from members of the association, compiles averages to protect the proprietary nature of the information, and provides averages for use by individual trade associ- ation members. Over the 20142015 and 20152016 periods, the inventory-to-sale conversion period has averaged 200 days, while the sale-to-cash conversion period (days of sales outstanding) for the industry has averaged 60 days. How did Scandi's operations compare with these industry averages in terms of these two components of the cash conversion cycle? MINICASE Scandi Home Furnishings, Inc. Kaj Rasmussen founded Scandi Home Furnishings as a corporation during mid-2013. Sales during the first to your 2014 of operation reached $1.3 million Sales increased by 15 percent in 2015 and another 20 percent in 2016. However, the increasing in 2015 over 2014, profits fell sharply in 2016, causing Kaj to wonder what was happening to his pride and jay' 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 Furnishings, located in easter North Carolina, design, manufactures, and sells Scandinavian designed furniture and accessories to home furnishings retailers. The modern Scandinavian design has a streamlined and uncut- tered look. While this furniture style is primarily associated with Denmark, both Norwegion 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 modern furniture, Danish furnishings and the home furnishings produced by other Scandinavian countries-Sweden, Norway, and Finland -are made using wood (primarily ook, maple, and ashl aluminum, steel, and high-grade plastics. Kaj grew up in Copenhagen, Denmark, and received an undergraduate degree from a technical university in Sweden. As is typical in Europe, Kaj bogan his business career as an apprentice at a major home furnishings manufacturer in Copenhagen. After learning the trade, he quickly moved into a management position in the fim. However, after a few (continued on next page) Scandi Home Furnishings, Inc. (Continued) years, Kaj realized that what he really wanted to do was to start and operate his own Scandinavian home furnishing 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 interest and industry-related 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. Following are the three years of income statements and balance sheets for Scandi Home Furnishings. Kaj felt that that he would need to continue to expand sales to maintain a competitive advantage. After first concentrating on selling Scan. dinavian home furnishings in the Northeast in 2014 and 2015, he decided to enter the West Coast market. An increase in expenses occurred associated with identifying. contacting, and selling to home furnishings retailers in California, Oregon, and Washington. Kaj Rasmussen hopes that you can help him better understand what has been happening to Scandi Home Furnishings from both operating and financial standpoints. SCANDI HOME FURNISHINGS, INC. 2015 2016 INCOME STATEMENTS $1,800,000 1.260,000 540,000 Net sales Cost of goods sold Gross profit Marketing General and administrative Depreciation EBIT Interest Earnings before taxes Income taxes (40%) Net income Cash Dividends 2014 $1.300.000 780,000 520,000 130,000 150,000 40.000 200,000 45,000 155,000 62,000 $ 93,000 $ 0 $1,500,000 900,000 600.000 150,000 150,000 53.000 247,000 57.000 190,000 76,000 $ 114,000 $ 74,000 200,000 200,000 60,000 80,000 70,000 10,000 4,000 $ 6,000 $ 0 SCANDI HOME FURNISHINGS, INC. 2014 BALANCE SHEETS 2015 2016 Cash Accounts receivable Inventories Total current assets Fixed assets, net Total assets $ 50.000 200,000 450,000 700,000 300,000 $1,000,000 $ 40,000 260,000 500,000 800,000 400.000 $1,200,000 $ 10,000 360,000 600,000 970,000 500.000 $1,470,000 Accounts payable Accruals Bank loan Total current liabilities Long-term debt Common stock Retained earnings Total liabilities and equity $ 130,000 50,000 90,000 270.000 300,000 350,000 80,000 $1,000,000 $ 170,000 70,000 90,000 330.000 400,000 350,000 120,000 $1,200,000 $ 180,000 80.000 184,000 444,000 550,000 350,000 126,000 $1,470,000 *350,000 shares of common stock were issued to Kaj Rasmussen and the venture investors when Scandi Home Furnishings, Inc. (Continued) A. An analysis of the cash conversion cycle should also help Kaj understand what has been happening to the operations of Scandi. Prepare an analysis of the average conversion periods for the three components of the cash conversion cycle for 2014-2015 and 20152016. Explain what has happened in terms of each component of the cycle B. Kaj has been able to obtain some industry ratio data from the home furnishings industry trade association to which he belongs. The industry association collects proprietary financial information from members of the association, compiles averages to protect the proprietary nature of the information, and provides averages for use by individual trade associ- ation members. Over the 20142015 and 20152016 periods, the inventory-to-sale conversion period has averaged 200 days, while the sale-to-cash conversion period (days of sales outstanding) for the industry has averaged 60 days. How did Scandi's operations compare with these industry averages in terms of these two components of the cash conversion cycle
