MINICASE Scandi Home Furnishings, Inc Rasmussen founded Scandi Home Furnishings as a corporation during mid-2013. Sales during the first full year of operation reached $1.3 million. Sales increased by 15 percent in 2015 and another 20 percent in 20 increasing in 2015 over 2014, profits fell sharply in 2016, causing Kaj to wonder what was happening to joy business venture. After all Kaj worked as closely as possible to a 24/7 pace, beginning with the s 16. However, after and continuing through the first three full years of operation startup of Scandi Scandi Home Furnishings, located in eastern North Carolina, designs, manufactures, and sells furniture and accessories to home funishings retailers. The modern Scandinavian design has a st tered look. While this fur miture style is primarily associated with Denmark, both Norwegian and Swedish designers have allure of Scandinavian home furnishings. Some say that the inspiration for the Scandinavian design curves of art nouveau from which designers were able to produce aesthetically pleasing. structurally strong modern furniture. Danish furnishings and the home funishings produced by other Scandinavian countries-Sweden, Norway, and Finland--are made using wood (primarily oak, 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 began 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 firm. However, after a few years, Kaj realized that what he really wanted to do was to start and operate his own Scandinavian home furnishings 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 Furmishings. Kaj felt that he would need to continue to expand sales to maintain a competitive advantage. After first concentrating on selling Scandinavian home furnishings in the Northeast in 2014 and 2015, he decided to enter the West Coast market. An in- crease in expenses occurred associated with identifying. contacting, and selling to home funishings retailers in Califomia, 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. INCOME STATEMENTS Net sales Cost of goods sold $1,500,000 $1,800,000 900000 1260.000 540,000 $1,300,000 600,000 Gross profit Marketing General and administrative Depreciation 520,000 130,000 50,000 150,000 247.000 190,000 200,000 60,000 80,000 200,000 10,000 155,000 62,000 Earnings before taxes Income taxes (40%) Net income Cash Dividends (continued on next page)