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LYRIX Panels Inc. (LPI) is a manufacturer of speciality panels, small tools for the panel industry, as well as sales of solar panel, which they

  1. LYRIX Panels Inc. (LPI) is a manufacturer of speciality panels, small tools for the panel industry, as well as sales of solar panel, which they build for other manufacturers. The company has been in business since 2015, results include 2020 and 2021. The company through its Board of Directors is developing a plan to acquire more equipment to expand its current facilities. The Board is recommending purchasing $250,000 of new equipment each year and wants to put away cash reserves to purchase the property next to at which has a value of $3,000,000.

The CFO who sits on the Board is concerned the Board may have unrealistic goals considering LPIs recent financial performance. The CFO is preparing a report to the Board outlining the concerns.

The following is a copy of the income statement:

LYRIX Panels Inc.

Income Statement (Cash Basis)

For the Years Ended June 30 (in thousands)

2021

2020

Revenues:

Speciality Panels

$ 475,000

$ 400,000

Solar Panels

275,000

235,000

Tools for Panel Industry

4,000

2,500

Total Revenues

$ 754,000

$ 637,500

Expenses:

Management Wages

$ 66,000

$ 66,000

Plant Wages

225,000

225,000

Plant Supplies

235,000

175

Utilties

68,000

61

Bank Charges and Interest

45,100

47,800

Miscellaneous

4,000

2,500

Total Expenses

$ 643,100

$ 341,536

Cash

$ 110,900

$ 295,965

Other financial information as of June 30, 2021:

1. Cash in bank $73,000

2. Mortgage Balance $3,600,000

3. Accounts Payable outstanding as of July 2021 is $25,000

4. The company purchased $250,000 worth of manufacturing equipment during the current fiscal year. Cash of $100,000 was paid on delivery with balance due on June 1, 2021. The amount has not been paid as of March 31, 2021. An additional $250,000 is planned for the coming year.

5. In June 2016, it purchased the current property for $6,000,000 (building and land), paying $1,200,000 down and agreeing to pay $300,000 plus 5% interest annually on the unpaid loan balance each July 1, starting on July 1, 2017.

6. Panel sales rose 4% in 2021 and expected sales to continue in the future.

7. Panel prices increased by 15% in 2021. The board expects to increase the panel prices by 15% in 2022.

8. Solar Panels pricing has not increased for 3 years. The policy by the Board is to encourage sales of solar panels to assist in overall sales. The company expects the percentage growth for 2021 to be the same for 2022.

9. Maintenance Equipment are expected to grow at the same rate as in 2021.

10. No other unpaid bills existed on June 30, 2021.

11. Operating expenses expected to increase:

  1. Plant and management wages to increase by 12%
  2. Plant Supplies, and Miscellaneous to increase by 28%
  3. Utilities by 10%

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