Manutech Ltd
Income Statement
Year Ended December 31
		2019		2018
Net sales		$ 1,470,000		$ 1,200,000
Variable Costs		882,000		720,000
Contribution Margin		$ 588,000		$ 480,000
Fixed Costs		177,000		114,000
Operating income (EBIT)		$ 411,000		$ 366,000
Interest expense		56,200		53,600
Earnings before taxes (EBT)		$ 354,800		$ 312,400
Income tax expense		106,440		93,720
Earnings after taxes (EAT)		$ 248,360		$ 218,680
Manutech Ltd
Statement of Financial Position
Year Ended December 31
		2019		2018
Assets
Current Assets
	Cash	$ 8,360		$ 79,500
	Accounts Receivable	150,000		105,000
	Merchandise Inventory	112,000		90,000
Total Current Assets		$ 270,360		$ 274,500
Property, Plant and Equipment		1,555,000		1,255,000
Accumulated Depreciation		(455,000)		(290,000)
	Property, Plant and Equiment (net)	$ 1,100,000		$ 965,000
Intangible Assets		120,000		120,000
Total Assets		$ 1,490,360		$ 1,359,500
Liabilities & Shareholder's Equity
Current Liabilities
	Accounts Payable	$ 65,000		$ 72,500
	Accrued Liabilities	15,000		20,000
	Bank Loan	85,000		-
Total Current Liabilities		$ 165,000		$ 92,500
Mortage Payable		650,000		670,000
Total Liaibilities		$ 815,000		$ 762,500
Shareholder's Equity
	Common Shares (10,000 issued)	100,000		100,000
	Retained Earnings	575,360		497,000
Total Shareholder's Equity		$ 675,360		$ 597,000
Total Liab & Shareholder's Equity		$ 1,490,360		$ 1,359,500

Manutech Ltd had a good year in 2019. Sales were up significantly and are expected continue to grow in 2020. The company has hired you as their new financial analyst and they want you to finish creating the year-end reporting package for the owner.

Specifically, you need to complete the table of ratios your predecessor started and comment on how the company is doing compared to industry averages. You also need to create the Statement of Cash Flows for 2019.

Finally, theyre a little concerned about the impact their high rate of growth is having on the financial stability of the company. They ask you to compare company results to industry results using the three components of DuPont analysis.

Q4. Required New Funding (10 marks)

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The purchase of a new piece of manufacturing machinery was a significant hit to Manutech Ltd's cash flow, requiring Manutech Ltd to borrow $85,000 from the bank. The owners want to avoid going into further debt, but are concerned because sales are expected to rise 20% in the coming year. Your investigations indicate that the new machine has the excess capacity to handle the increase in sales volumes. The owners asked you to use the RNF formula to calculate if they can expect a surplus or a deficit of funds. They make it very clear their objective is to pay off the bank loan first. So any surplus funds would reduce the bank loan first then the Mortgage Payable. Any deficit of funds would cause the Bank Loan to increase.

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Enter the result of the RNF formula (don't forget the negative sign, if appropriate) and indicate, by the drop-down, if they will generate surplus funds or need external funds.)

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The result of the RNF calculation is: $ . This means the firm will (Click to select) have surplus funds to help pay off the bank loan. need external funds, causing the bank loan to increase. .

(Be sure to submit supporting calculations to the Slate drop box.)

(You have finished using the financial statements presented for Manutech Ltd.)