SCANDI HOME FURNISHINGS, INC.

Income Statements

2014 2015 2016

Net Sales $1,300,000 $1,500,000 $1,800,000

Cost of Goods Sold 780,000 900,000 1,260,000

Gross Profit 520,000 600,000 540,000

Marketing 130,000 150,000 200,000

General & Administrative 150,000 150,000 200,000

Depreciation 40,000 53,000 60,000

EBIT 200,000 247,000 80,000

Interest 45,000 57,000 70,000

Earnings Before Taxes 155,000 190,000 10,000

Income Taxes (40%) 62,000 76,000 4,000

Net Income $93,000 $114,000 $6,000

SCANDI HOME FURNISHINGS, INC.

Balance Sheets

2014 2015 2016

Cash $50,000 $40,000 $10,000

Accounts Receivables 200,000 260,000 360,000

Inventories 450,000 500,000 600,000

Total Current Assets 700,000 800,000 970,000

Fixed Assets 300,000 400,000 500,000

Total Assets $1,000,000 $1,200,000 $1,470,000

Accounts Payable $180,000 $240,000 $260,000

Bank Loan 90,000 90,000 184,000

Total Current Liabilities 270,000 330,000 444,000

Long-Term Debt 300,000 400,000 550,000

Common Stock 350,000 350,000 350,000

Retained Earnings 80,000 120,000 126,000

Total Liab. & Equity $1,000,000 $1,200,000 $1,470,000

Kaj should be interested in knowing whether Scandi has been building or burning cash. Compare the cash build, cash burn, and the net cash build/burn positions (and their rates) for 2015 and 2016. What, if any, changes have occurred?

Creditors, as well as management, are also concerned about the ability of the venture to meet its debt obligations (and interest) as they come due and the relative size of equity investments to debt levels. Calculate ratios in each of these areas for 2014-2016. Interpret your results and explain what has happened to Scandi.

Kaj and the venture investors are also interested in how efficiently Scandi is able to convert their equity investment, as well as the ventures total assets, into sales. Calculate several ratios that combine data from the income statements and balance sheets and compare what has happened from 2014-2016.