please help w this mini case all parts A-G will upvote quicky

Chapter 5: Evaluating Operating and Financial Performance 191 MINICASE Scandi Home Furnishings, Inc. Kaj Hasmussen founded Scandi Home Furnishings as a corporation during mid-2013. Sales during the first full year 2014 of operation reached $1.3 million Sales increased by 15 percent in 2015 and another 20 percent in 2016. However, at increasing in 2015 over 2014, profits fell sharply in 2016, causing Kai 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, manufactures, and sells Scandinavian-designed furniture and accessories to home furnishings retailers. The modern Scandinavian design has a streamlined and uncut tered 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 ashi, 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 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 the United States. Kaj moved to the United States in early 2013 With $140.000 of his personal assets and S210.000 from venture investors, he began operations in mid-2013. Kai 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 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 furnishings retailers in California, 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 Gross profit Marketing General and administrative Depreciation 2014 $1.300.000 780.000 520,000 130.000 150.000 40.000 200,000 45,000 155.000 62,000 $ 100 2015 $1,500,000 900,000 500.000 150.000 150.000 53000 247.000 57,000 190.000 75.000 $ 114CCO $ 74,000 2016 $1,800,000 1.250.000 510.000 200,000 200,000 60,000 B0000 20.000 EBIT 10000 Interest Earnings before taxes Income taxes (40%) Net income Cash Dividends continued on next page) 192 Part 2: Organizing and Operating the Venture Scandi Home Furnishings, Inc. (Continued) SCANDI HOME FURNISHINGS, INC. 2016 2015 BALANCE SHEETS 2014 $ 40,000 10.000 $ $ Cash 50,000 380.000 250.000 200,000 Accounts receivable 600.000 500,000 450.000 Inventories 970.000 B00.000 700,000 Total current assets 500.000 400.000 300,000 Fixed assets.net $1.470.000 Total assets $1.200.000 $1.000.000 $ 180,000 Accounts payable $ 170,000 $ 130.000 80.000 70,000 Accruals 184000 Bank loan 90.000 90.000 444.000 Total current liabilities 330.000 270.000 550.000 Long-term det 300,000 400.000 Common stock 350,000 350,000 350,000 125.000 Retained earnings 80.000 120.000 Total liabilities and equity $1.000.000 $1.200.000 $1,470,000 350.000 shares of common stock were issued to Kai Rasmussen and the venture investors when Scandi Home Furnishings was incorporated in mid-2013 50.000 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 concemed by the drop in cash from $50,000 in 2014 to $10,000 in 2016. Calculate the average current ratio, the quick ratio, and the NWC-to-total-assets ratio for 2014-2015 and 2015-2016. What has happened to Scandi's liquidity position? B. Kaj should be interested in knowing whether Scandi has been building or burning cash. Compare the cash build, cash bum, and the net cash build/burn positions for 2015 and 2016. What if any changes have occurred? Part B Your 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 obligations 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 2014-2015 and 2015-2016 periods. Interpret your results and explain what has happened to Scandi. n 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 for 2014-2015 and 2015-2016 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 halance sheets and compare what has happened between the 2014-2015 and 2015-2016 porinde of the product of two ratios provides 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 efficiency profitability, and leverage performance. Calculate HUA and ROE models for the 2014-2015 and 2015-2016 periods. Provide an interpretation of your findings Chapter 5: Evaluating Operating and Financial Performance 193 Scandi Home Furnishings, Inc. (Continued) Part C Your third challenge is to advise kaj on what has been happening to Scandi relative to financial developments in the home furnishings industry. G. Kaj has been able to obtain some industry ratio data from 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 navides averages for use by individual trade associ ation members Trade association data for the home furnishings industry show an average net profit margin of 5.5 percent, a sales- to-assets ratio of 1.3 times, and a total debt-to-total-acts rating 55 percent over the 2014-2015 and 2015-2016 periods. Compare and contrast Scandi's results with the industry average in terms of the human Make sure you compare the components of each model as well as the product of the components Chapter 5: Evaluating Operating and Financial Performance 191 MINICASE Scandi Home Furnishings, Inc. Kaj Hasmussen founded Scandi Home Furnishings as a corporation during mid-2013. Sales during the first full year 2014 of operation reached $1.3 million Sales increased by 15 percent in 2015 and another 20 percent in 2016. However, at increasing in 2015 over 2014, profits fell sharply in 2016, causing Kai 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, manufactures, and sells Scandinavian-designed furniture and accessories to home furnishings retailers. The modern Scandinavian design has a streamlined and uncut tered 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 ashi, 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 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 the United States. Kaj moved to the United States in early 2013 With $140.000 of his personal assets and S210.000 from venture investors, he began operations in mid-2013. Kai 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 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 furnishings retailers in California, 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 Gross profit Marketing General and administrative Depreciation 2014 $1.300.000 780.000 520,000 130.000 150.000 40.000 200,000 45,000 155.000 62,000 $ 100 2015 $1,500,000 900,000 500.000 150.000 150.000 53000 247.000 57,000 190.000 75.000 $ 114CCO $ 74,000 2016 $1,800,000 1.250.000 510.000 200,000 200,000 60,000 B0000 20.000 EBIT 10000 Interest Earnings before taxes Income taxes (40%) Net income Cash Dividends continued on next page) 192 Part 2: Organizing and Operating the Venture Scandi Home Furnishings, Inc. (Continued) SCANDI HOME FURNISHINGS, INC. 2016 2015 BALANCE SHEETS 2014 $ 40,000 10.000 $ $ Cash 50,000 380.000 250.000 200,000 Accounts receivable 600.000 500,000 450.000 Inventories 970.000 B00.000 700,000 Total current assets 500.000 400.000 300,000 Fixed assets.net $1.470.000 Total assets $1.200.000 $1.000.000 $ 180,000 Accounts payable $ 170,000 $ 130.000 80.000 70,000 Accruals 184000 Bank loan 90.000 90.000 444.000 Total current liabilities 330.000 270.000 550.000 Long-term det 300,000 400.000 Common stock 350,000 350,000 350,000 125.000 Retained earnings 80.000 120.000 Total liabilities and equity $1.000.000 $1.200.000 $1,470,000 350.000 shares of common stock were issued to Kai Rasmussen and the venture investors when Scandi Home Furnishings was incorporated in mid-2013 50.000 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 concemed by the drop in cash from $50,000 in 2014 to $10,000 in 2016. Calculate the average current ratio, the quick ratio, and the NWC-to-total-assets ratio for 2014-2015 and 2015-2016. What has happened to Scandi's liquidity position? B. Kaj should be interested in knowing whether Scandi has been building or burning cash. Compare the cash build, cash bum, and the net cash build/burn positions for 2015 and 2016. What if any changes have occurred? Part B Your 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 obligations 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 2014-2015 and 2015-2016 periods. Interpret your results and explain what has happened to Scandi. n 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 for 2014-2015 and 2015-2016 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 halance sheets and compare what has happened between the 2014-2015 and 2015-2016 porinde of the product of two ratios provides 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 efficiency profitability, and leverage performance. Calculate HUA and ROE models for the 2014-2015 and 2015-2016 periods. Provide an interpretation of your findings Chapter 5: Evaluating Operating and Financial Performance 193 Scandi Home Furnishings, Inc. (Continued) Part C Your third challenge is to advise kaj on what has been happening to Scandi relative to financial developments in the home furnishings industry. G. Kaj has been able to obtain some industry ratio data from 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 navides averages for use by individual trade associ ation members Trade association data for the home furnishings industry show an average net profit margin of 5.5 percent, a sales- to-assets ratio of 1.3 times, and a total debt-to-total-acts rating 55 percent over the 2014-2015 and 2015-2016 periods. Compare and contrast Scandi's results with the industry average in terms of the human Make sure you compare the components of each model as well as the product of the components