Marion has a muffin shop located in a rented 1200 square foot building in a small town of approximately 10,000 people. The only major competition includes local restaurants, a donut shop, and a coffee shop located in the local grocery.

Marion sells her wonderful Magic Muffins for $5.95 each. The cost to produce these muffins is $3.25 each which includes all ingredients. S

he is open six days a week, closed Sundays and 10 holidays throughout the year (use a 365 day year for calculations). She averages 85 sales per day.

Her rent is $1,000 per month and she has a 5 year lease. Typically she spends $3,600 per year on radio and print advertising. Utilities average $900 per month. Phone service including phone, cell phone and interned is $300 per month, vehicle gas averages $85.00 per month. Insurance is $2,475 per year. Paper supplies including napkins cupcake paper liners are included in the cost of goods. She is currently leasing a large mixer and dishwasher at $150.00 per month total. Her store license is $795 per year, she has a budget of $500 per year for replacement pans and other equipment.

Marion has one part time employee that is paid $12/ hour and works 25 hours per week. She owns a delivery vehicle valued at $22,000. Her store equipment has a value of $11,500. And she maintains an inventory of $1,500.

Since starting her business she has managed to save $5,000 in her business operating account and she has a savings account of $20,000. She has annual depreciation of $2,500 and accumulated depreciation in the amount of $15,000. Currently she has $500.00 in accounts receivable and $1,200.00 in accounts payable. She also has a $30,000 five year bank loan at 6%.

Assignment Instructions and Materials:

Using the information provided in the prompt, calculate and/or respond accordingly to the following:

Develop a profit and loss statement for Marions Magic Muffins. Use proper form see page 27 in the book as a template.

Develop a balance sheet for Marions Magic Muffins. Use proper form see page 31 in the book as a template.

Based on the information you calculated in questions 1 and 2 above calculate the following ratios:

Profit Margin

Receivable turnover

Inventory turnover

Quick Ratio

Current Ratio

Times Interest earned

In a narrative statement of approximately 500 to 750 words how is Marions business doing? Provide a review of the income statement, balance sheet and ratios. Explain and be specific.

It has been three years and Marions business is doing well. She wants to expand and offer coffee and specialty cakes. Construct a new balance sheet and profit and loss statement using the following information:

The loan is currently at $20,000 and she is seeking an additional loan of $15,000 for equipment

Cost of goods for muffins have increased 5%

Selling price has remained the same for muffins.

Selling and administrative expenses have increased 3% (rent and depreciation have remained the same)

Selling price of cakes is $9.95 each and Marion estimates that she will sell 10 per week

Cost of making the cakes is $6.85 each

Selling price of coffee is $3.95 per cup (No free refills)

Cost of producing the coffee is $.59 per cup. She estimates selling 50 cups per day.

Due to the increase business she needs to hire an additional employee for a total of two. Each working 25 hours per week at $12.00 per hour.

In a narrative statement of approximately 500 to 750 words analyze Marions proposal to add coffee and cakes to her menu. Is this a good deal for Marion? If you were the banker would you give her a loan of $15,000 (Total loans of $35,000)? Why or why not? Explain and be specific.