The Castillo Products Company was started in 2014 The company manufactures components for personal decision assistant (PDA) products and for other hand held electronic products A difficult operating year 2015 was followed by a profitable 2016 However, the founders (Cindy and Rob Castillo) are still concerned about the venture's liquidity position and the amount of cash being used to operate the firm Following are income statements and balance sheets for the Castillo Products Company for 2015 and 2016 CASTILLO PRODUCTS COMPANY Income Statement 2015 2016 Net Sales $900,000 $1,500,000 Cost of Goods Sold 540,000 900,000 Gross Profit 360,000 600,000 Marketing 90,000 150,000 General Administrative 250,000 250,000 Depreciation 40,000 40,000 EBIT 20,000 160,000 Interest 45,000 60,000 Earnings Before Taxes 65,000 100,000 Income Taxes 0 25,000 Net Income (Loss) $65,000 $75,000 Balance Sheet 2015 2016 Cash $55,000 $20,000 Accounts Receivables 200,000 280,000 Inventories 400,000 500,000 Total Current Assets 655,000 800,000 Gross Fixed Assets 450,000 540,000 Accumulated Depreciation 100,000 140,000 Net Fixed Assets 350,000 400,000 Total Assets $1,005,000 $1,200,000 Accounts Payable $135,000 $160,000 Accruals 50,000 70,000 Bank Loan 90,000 100,000 Total Current Liabilities 275,000 330,000 Long Term Debt 300,000 400,000 Common Stock ($ 05 par) 150,000 150,000 Additional Paid in Capital 200,000 200,000 Retained Earnings 80,000 120,000 Total Liab Equity $1,005,000 $1,200,000 Use year end data to calculate the current ratio, the quick ratio, and the net working capital (NWC) to total assets ratio for 2015 and 2016 for the Castillo Company Explain what these changes might suggest Thus, the current ratio of company CP is 2 41 for year 2015 current Ratio $800,000 $330,000 Thus, the current ratio of company CP is 2 42 for year 2016 Use Castillo's complete income statement data and the changes in balance sheet items between 2015 and 2016 to determine the firm's cash build and cash burn for 2016 Did Castillo have a net cash build or net cash burn for 2016 Convert the annual cash build and cash burn amounts calculated in Part B to monthly cash build and cash burn rates Also indicate the amount of the net monthly cash build or cash The Castillo Products Company was started in 2014 The company manufactures components for personal decision assistant (PDA) products and for other hand held electronic products A difficult operating year 2015 was followed by a profitable 2016 However, the founders (Cindy and Rob Castillo) are still concerned about the venture's liquidity position and the amount of cash being used to operate the firm Following are income statements and balance sheets for the Castillo Products Company for 2015 and 2016 CASTILLO PRODUCTS COMPANY Income Statement 2015 2016 Net Sales $900,000 $1,500,000 Cost of Goods Sold 540,000 900,000 Gross Profit 360,000 600,000 Marketing 90,000 150,000 General Administrative 250,000 250,000 Depreciation 40,000 40,000 EBIT 20,000 160,000 Interest 45,000 60,000 Earnings Before Taxes 65,000 100,000 Income Taxes 0 25,000 Net Income (Loss) $65,000 $75,000 Balance Sheet 2015 2016 Cash $55,000 $20,000 Accounts Receivables 200,000 280,000 Inventories 400,000 500,000 Total Current Assets 655,000 800,000 Gross Fixed Assets 450,000 540,000 Accumulated Depreciation 100,000 140,000 Net Fixed Assets 350,000 400,000 Total Assets $1,005,000 $1,200,000 Accounts Payable $135,000 $160,000 Accruals 50,000 70,000 Bank Loan 90,000 100,000 Total Current Liabilities 275,000 330,000 Long Term Debt 300,000 400,000 Common Stock ($ 05 par) 150,000 150,000 Additional Paid in Capital 200,000 200,000 Retained Earnings 80,000 120,000 Total Liab Equity $1,005,000 $1,200,000 Use year end data to calculate the current ratio, the quick ratio, and the net working capital (NWC) to total assets ratio for 2015 and 2016 for the Castillo Company Explain what these changes might suggest Thus, the current ratio of company CP is 2 41 for year 2015 current Ratio $800,000 $330,000 Thus, the current ratio of company CP is 2 42 for year 2016 Use Castillo's complete income statement data and the changes in balance sheet items between 2015 and 2016 to determine the firm's cash build and cash burn for 2016 Did Castillo have a net cash build or net cash burn for 2016 Convert the annual cash build and cash burn amounts calculated in Part B to monthly cash build and cash burn rates Also indicate the amount of the net monthly cash build or cash

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Nov 19, 2024

The Castillo Products Company was started in 2014. The company manufactures components for personal decision assistant (PDA) products and for other hand-held electronic products. A

The Castillo Products Company was started in 2014. The company manufactures components for personal decision assistant (PDA) products and for other hand-held electronic products. A difficult operating year 2015 was followed by a profitable 2016. However, the founders (Cindy and Rob Castillo) are still concerned about the venture's liquidity position and the amount of cash being used to operate the firm. Following are income statements and balance sheets for the Castillo Products Company for 2015 and 2016.

CASTILLO PRODUCTS COMPANY

Income Statement 2015 2016

Net Sales $900,000 $1,500,000

Cost of Goods Sold 540,000 900,000

Gross Profit 360,000 600,000

Marketing 90,000 150,000

General & Administrative 250,000 250,000

Depreciation 40,000 40,000

EBIT -20,000 160,000

Interest 45,000 60,000

Earnings Before Taxes -65,000 100,000

Income Taxes 0 25,000

Net Income (Loss) -$65,000 $75,000

Balance Sheet 2015 2016

Cash $55,000 $20,000

Accounts Receivables 200,000 280,000

Inventories 400,000 500,000

Total Current Assets 655,000 800,000

Gross Fixed Assets 450,000 540,000

Accumulated Depreciation -100,000 -140,000

Net Fixed Assets 350,000 400,000

Total Assets $1,005,000 $1,200,000

Accounts Payable $135,000 $160,000

Accruals 50,000 70,000

Bank Loan 90,000 100,000

Total Current Liabilities 275,000 330,000

Long-Term Debt 300,000 400,000

Common Stock ($.05 par) 150,000 150,000

Additional Paid-in-Capital 200,000 200,000

Retained Earnings 80,000 120,000

Total Liab. & Equity $1,005,000 $1,200,000

Use year-end data to calculate the current ratio, the quick ratio, and the net working capital (NWC) to total assets ratio for 2015 and 2016 for the Castillo Company. Explain what these changes might suggest.

Thus, the current ratio of company CP is 2.41 for year 2015.

current Ratio = $800,000/$330,000

Thus, the current ratio of company CP is 2.42 for year 2016.

Use Castillo's complete income statement data and the changes in balance sheet items between 2015 and 2016 to determine the firm's cash build and cash burn for 2016. Did Castillo have a net cash build or net cash burn for 2016?

Convert the annual cash build and cash burn amounts calculated in Part B to monthly cash build and cash burn rates. Also indicate the amount of the net monthly cash build or cash