Part A Your first challenge is to advise Kaj on what has been happening with Scandi Home Furnishings from a liquidity perspective. A. Kaj was particularly concerned by the drop in cash from $50,000 in 2017 to $10,000 in 2019. Calculate the average current ratio, the quick ratio, and the NWC-to-total assets ratio from 2017-2018 and 2018-2019. What has happened to Scandi's liquidity position? B. Kaj should be interested in knowing whether Scandi has been building or burning cash. [2] Compare the cash build, cash burn, and the net cash build/burn positions for 2018 and 2019. What, if any, changes have occurred? Part B You second challenge is to advise Kaj on what has been happening to Scandi from a financial leverage, profitability, and efficiency perspective. C. Creditors, as well as management, are also concerned about the ability of the venture to meet its debt obligations as they come due, the proportion of current liabilities to total debt, the availability of assets to meet debt obligation in the event of financial distress, and the relative size of equity investments to debt levels. Calculate average ratios in each of these areas for the 2017-2018 and 2018-2019 periods. Interpret your fesults and explain what has happened to Scandi. D. Of importance to Kaj and the venture investors is the efficiency of the operations of the venture. Several profit margin ratios relating to the income statement are available to help analyze Scandi's performance. Calculate average profit margin ratios for 2017-2018 and 2018-2019 and describe what is happening to the profitability of Scandi Home Furnishings. E. Kaj and the venture investors are also interested in how efficiently Scandi is able to convert its equity investment, as well as the venture's total assets, into sales. Calculate several ratios that combine data from the income statements and balance sheets and compare what has happened between the 20172018 and 20182019 periods. F. An ROA model consisting of the product of three ratios and simultaneously shows an overview of a venture's efficiencv and profitabilitv at the same time. An ROE model F. An ROA model consisting of the product of three ratios and simultaneously shows an overview of a venture's efficiency and profitability at the same time. An ROE model consists of the product of three ratios and simultaneously shows an overview of a venture's efficiency, profitability, and leverage performance. Calculate ROA and ROE models for the 2017-2018 and 2018-2019 periods. Provide an interpretation of your findings. Part C Your third challenge is to advise Kaj on what has been happening to Scandi relative to financial developments in the home furnishing industry. G. Kaj has been able to obtain some industry ratio data hom the home furnishings industry trade association to which he belongs. The industry association collects proprietary financial information from members of the association, compiles averages to protect the proprietary nature of the information, and provides averages for use by individual trade association members. Trade association data for the home furnishings industry show an average net profit margin of 6.5 percent, as sales-to-assets ratio of 1.3 times, and a total debt-to-total-assets ratio of 55 percent over the 2017-2018 and 2018-2019 periods. Compare and contrast Scandi's results with the industry average in terms of the ROA and ROE models. Make sure you compare the components of each model as well as the product of the components. 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. SCANDI HOME FURNISHINGS, INC. *350.000 shares of commonstock were issued to Kaj Rasmussen and the venture investors when Scandi Home Furnishings was incorporated in mid-2016. Scandi Home Funishings. Inc. Kaj Rasmussen founded Scandi Home Furnishings as a corporation during mid-2016. Sales during the first full year (2017) of operation reached $1.3 million. Sales increased by 15 percent in 2018 and another 20 percent in 2019. However, after increasing in 2018 over 2017, profits fell sharply in 2019 , causing Kaj to wonder what was happening to his "pride and joy" business venture. After all, Kaj worked as closely as possible to a 24/7 pace, beginning with the startup of Scandi and continuing through the first three full years of operation. Scandi Home Furnishings, located in eastern North Carolina, designs manufacturers, and sells Scandinavian-designed furniture and accessories to home furnishings retailers. The modern Scandinavian design has a streamlined and uncovered look. While this furniture style is primarily associated with Denmark, both Norwegian and Swedish designers have contributed to the allure of Scandinavian home furnishings. Some say that the inspiration for the Scandinavian design can be traced to the elegant curves of art nouveau from which designers were able to produce aesthetically pleasing, structurally strong modern furniture. Danish furnishings and the home furnishings produced by other Scandinavian countries-Sweden Norway, and Finland-are made using wood (primarily oak, maple, and ash), 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 2016 . With $140,000 of his personal assets and $210,000 from venture investors, he began operations in mid-2016. 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 Furnishings. 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 2017 and 2018, he decided to enter the West Coast market. An increase in expenses occurred associated with identifying, contacting, and selling to home furnishings retailers in California, Oregon, and Washington. Kaj Part A Your first challenge is to advise Kaj on what has been happening with Scandi Home Furnishings from a liquidity perspective. A. Kaj was particularly concerned by the drop in cash from $50,000 in 2017 to $10,000 in 2019. Calculate the average current ratio, the quick ratio, and the NWC-to-total assets ratio from 2017-2018 and 2018-2019. What has happened to Scandi's liquidity position? B. Kaj should be interested in knowing whether Scandi has been building or burning cash. [2] Compare the cash build, cash burn, and the net cash build/burn positions for 2018 and 2019. What, if any, changes have occurred? Part B You second challenge is to advise Kaj on what has been happening to Scandi from a financial leverage, profitability, and efficiency perspective. C. Creditors, as well as management, are also concerned about the ability of the venture to meet its debt obligations as they come due, the proportion of current liabilities to total debt, the availability of assets to meet debt obligation in the event of financial distress, and the relative size of equity investments to debt levels. Calculate average ratios in each of these areas for the 2017-2018 and 2018-2019 periods. Interpret your fesults and explain what has happened to Scandi. D. Of importance to Kaj and the venture investors is the efficiency of the operations of the venture. Several profit margin ratios relating to the income statement are available to help analyze Scandi's performance. Calculate average profit margin ratios for 2017-2018 and 2018-2019 and describe what is happening to the profitability of Scandi Home Furnishings. E. Kaj and the venture investors are also interested in how efficiently Scandi is able to convert its equity investment, as well as the venture's total assets, into sales. Calculate several ratios that combine data from the income statements and balance sheets and compare what has happened between the 20172018 and 20182019 periods. F. An ROA model consisting of the product of three ratios and simultaneously shows an overview of a venture's efficiencv and profitabilitv at the same time. An ROE model F. An ROA model consisting of the product of three ratios and simultaneously shows an overview of a venture's efficiency and profitability at the same time. An ROE model consists of the product of three ratios and simultaneously shows an overview of a venture's efficiency, profitability, and leverage performance. Calculate ROA and ROE models for the 2017-2018 and 2018-2019 periods. Provide an interpretation of your findings. Part C Your third challenge is to advise Kaj on what has been happening to Scandi relative to financial developments in the home furnishing industry. G. Kaj has been able to obtain some industry ratio data hom the home furnishings industry trade association to which he belongs. The industry association collects proprietary financial information from members of the association, compiles averages to protect the proprietary nature of the information, and provides averages for use by individual trade association members. Trade association data for the home furnishings industry show an average net profit margin of 6.5 percent, as sales-to-assets ratio of 1.3 times, and a total debt-to-total-assets ratio of 55 percent over the 2017-2018 and 2018-2019 periods. Compare and contrast Scandi's results with the industry average in terms of the ROA and ROE models. Make sure you compare the components of each model as well as the product of the components. 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. SCANDI HOME FURNISHINGS, INC. *350.000 shares of commonstock were issued to Kaj Rasmussen and the venture investors when Scandi Home Furnishings was incorporated in mid-2016. Scandi Home Funishings. Inc. Kaj Rasmussen founded Scandi Home Furnishings as a corporation during mid-2016. Sales during the first full year (2017) of operation reached $1.3 million. Sales increased by 15 percent in 2018 and another 20 percent in 2019. However, after increasing in 2018 over 2017, profits fell sharply in 2019 , causing Kaj to wonder what was happening to his "pride and joy" business venture. After all, Kaj worked as closely as possible to a 24/7 pace, beginning with the startup of Scandi and continuing through the first three full years of operation. Scandi Home Furnishings, located in eastern North Carolina, designs manufacturers, and sells Scandinavian-designed furniture and accessories to home furnishings retailers. The modern Scandinavian design has a streamlined and uncovered look. While this furniture style is primarily associated with Denmark, both Norwegian and Swedish designers have contributed to the allure of Scandinavian home furnishings. Some say that the inspiration for the Scandinavian design can be traced to the elegant curves of art nouveau from which designers were able to produce aesthetically pleasing, structurally strong modern furniture. Danish furnishings and the home furnishings produced by other Scandinavian countries-Sweden Norway, and Finland-are made using wood (primarily oak, maple, and ash), 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 2016 . With $140,000 of his personal assets and $210,000 from venture investors, he began operations in mid-2016. 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 Furnishings. 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 2017 and 2018, he decided to enter the West Coast market. An increase in expenses occurred associated with identifying, contacting, and selling to home furnishings retailers in California, Oregon, and Washington. Kaj