Speedo, Inc.

An exercise in financial statements and cash flow

Speedo, Inc. (Speedo) is a small company that makes and sells cell phone cases in Des Plaines, IL. Adrian Carrazco, the founder, is in charge of the design and sale of the cases but his background is in design and not business. Hence, the companys books leave a lot to be desired.

The startup funding for the company had come from Adrian and his friends and family. The startup funding was relatively small as the company was only selling the cases in kiosks at a local mall. The original investors didnt really need any detailed financial analysis but word of their product soon spread. As demand for the cases increased, Adrian considers a major expansion. He plans on opening a store and also considers the possibility of selling his cell phone cases to other distributors.

Adrians expansion plans require a significant investment which he plans to finance with additional funds from outside investors plus bank loans. Of course, the new investors, and especially the banks, will require better financial disclosure and detailed financial statements. Adrian has hired an NEIU graduate, Anna Cole, to evaluate the performance of the business over the past year.

Having gone through the bank statements, revenue receipts, tax returns, and other financial information, Anna has put together the following:

	2015	2016
COGS	203,963	257,528
Cash	29,429	31,267
Depreciation	57,576	65,076
Interest Expense	12,530	14,345
SG&A	40,110	52,351
Accounts Payable	52,015	57,708
Net Fixed Assets	254,017	316,825
Sales	400,111	487,712
Account Receivable	20,854	27,050
Notes Payable	23,708	25,885
Long Term Debt	128,218	143,971
Inventory	43,884	60,222
New Equity	0	24,192

Speedo presently pays out 50% of earnings as dividends to Adrian and the original investors. The companys tax rate is 20%.

• Determine the companys operating cash flow for 2015 and 2016 by using the below template but separated for each year.

Using the OCF equation:

OCF = EBIT + Depreciation Taxes

The OCF for each year is: