Mini$-$Case Study: Financial Statements for Sunset Boards

Sunset Boards is a small company that manufactures and sells surfboards in Malibu. Tad Marks, the founder of the

company, is in charge of the design and sale of the surfboards, but his background is in surfing, not business. As a

result, the company's financial records are not well maintained.

The initial investment in Sunset Boards was provided by Tad and his friends and family. Because the initial investment

was relatively small, and the company made surfboards only for its own store, the investors haven't required detailed

financial statements from Tad. But thanks to word of mouth among professional surfers, sales have picked up recently,

and Tad is considering a major expansion. His plans include opening another surfboard store in Hawaii, as well as

supplying his "sticks" $($surfer lingo for boards$)$ to other sellers.

Tad's expansion plans require a significant investment, which he plans to finance with a combination of additional funds

from outsiders plus some money borrowed from banks. Naturally, the new investors and creditors require more

organized and detailed financial statements than Tad has previously prepared. At the urging of his investors, Tad has

hired financial analyst Christina Wolfe to evaluate the performance of the company over the past year.

After rooting through old bank statements, sales receipts, tax returns, and other records, Christina has assembled the

financial information shown in the table to the right. $======>$

As Christina's assistant, you are asked to prepare financial calculations and then use them to evaluate the wisdom of

Tad's expansion plans. The financial statements and calculations you must prepare include:

Prepare an Income Statement for both $2018$ and $2019$

Prepare a Balance Sheet for both $2018$ and $2019$

Create a Cash Flow Statement for $2019$

Finally, using the above calculations as a foundation for your analysis, comment on the wisdom of Tad's expansion

plans. Should the company expand at this time? Why or why not? Provide a few sentences of discussion and your

conclusion to demonstrate your ability to draw insights from these financial statements.Mini$-$Case Study: Financial Statements for Sunset Boards