The written recommendation to NGS should cover the following topics:

CLO $1$: As a small business, NGS has made changes in their Accounts Receivable Policy in the past year. But Nicole is unsure whether the changes have made a difference.

Calculate $2021$ and $2020$ Days to Collect Receivable and Receivables Turnover. Evaluate the short$-$term solvency for NGS based on the year$-$over$-$year change.

Provide recommendations for Accounts Receivable policies that could reduce the days to collect.

CLO $2$: NGS is considering purchasing a tanning bed for $$15,000$ to add a new service to her business. Nicole was not aware that there were different methods for calculating amortization. Nicole would like to understand the difference between each method, and which method is suitable for her business.

Calculate amortization and record the journal entry for Year $1$ using the following methods:

Straight line methodology assuming a useful life of $10$ years.

Double declining methodology assuming a rate of $10\%.$

Units of production methodology, where a total of $500$ uses. Nicole forecasts that the tanning bed will be used $50$ times in Year $1.$

What is the difference between the three methods? Advise NGS which amortization methodology is suitable for her business and why.

CLO $3$: NGS is owned by Nicole, who is a sole proprietor.

NGS has recently heard about incorporation. Advise NGS as what are the advantages for having a corporation.

Calculate NGS$$s return on assets and return on equity for $2021$ and $2020.$ Explain what the change in each ratio means.

CLO $4$: NGS has been growing in revenue over the past three years. NGS would like to expand to a new location, but NGS does not have enough funding for expansion. NGS would like to explore options to raise funds through incurring debt.

Explain the three options of raising financing available to NGS:

Bank Loan

Corporate Bond

Private Capital

A bank loan focuses on two ratios: Debt$-$to$-$Assets Ratio and Times Interest Earned Ratio. Calculate these two ratios for $2021$ and $2020.$ Explain to NGS as to what these two ratios represent.

The bank requires a Debt$-$to$-$Asset ratio of less than one. Explain the Debt$-$to$-$Asset ratio for NGS$,$ and whether NGS will meet the bank criteria or not.

CLO $6$: NGS wants a financial analysis of its performance for $2021$ and $2020.$ Note: express analysis as percentage.

Calculate the horizonal analysis for the balance sheet and income statement. Discuss the results of the horizontal analysis.

Calculate the vertical analysis for the balance sheet and income statement. Discuss the results of the vertical analysis.

This Case Study is worth $30\%$ of your overall grade. It will allow you to demonstrate your understanding of the following concepts covered during Days $1-5$ and $7$:

CLO $1$: Demonstrate an understanding of temporary investments, accounts receivable, and bad debts.

CLO $2$: Analyze the effects of various factors on financial statements.

CLO $3$: Demonstrate and apply an understanding of shareholder's equity section of the balance sheet including capital contributions and dividends.

CLO $4$: Analyze corporate debt transactions and explain its impact on financial statements.

CLO $6$: Analyze financial statement information using ratios and other techniques. Balance Sheet

Cash

Accounts Receivable, Net

Inventory

Prepaid Expenses

Other Current Assets

Total Current Assets

Property and Equipment, Net

Total Assets

Current Liabilities

Long$-$Term Liabilities

Total Liabilities

Common Stock

Retained Earnings

Total Stockholders' Equity

Total Liabilities and Stockho$[$ders$\text{'}$ Equity

Income Statement

Sales Revenue

Cost of Goods Sold

Gross Profit

Operating Expenses

Income from Operations

Interest Expense

Income before Income Tax Expense

Income Tax Expense

Net Income

$2021$

$ $6\mathrm{.}700$

$2,000$

$1\mathrm{.}200$

$750$

$300$

$10\mathrm{.}950$

$64\mathrm{.}000$

$$74\mathrm{.}950$

$ $8\mathrm{.}000$

$35\mathrm{.}000$

$43\mathrm{.}000$

$25\mathrm{.}000$

$6\mathrm{.}950$

$31\mathrm{.}950$

$$74\mathrm{.}950$

$$80,000$

$65\mathrm{.}000$

$15\mathrm{.}000$

$4,000$

$11\mathrm{.}000$

$1\mathrm{.}000$

$10\mathrm{.}000$

$3,050$

$ $6\mathrm{.}950$

$2020$

$ $4\mathrm{.}200$

$2,500$

$3\mathrm{.}000$

$1\mathrm{.}050$

$350$

$11\mathrm{.}100$

$79\mathrm{.}000$

$$90,100$

$ $8,000$

$50\mathrm{.}000$

$58\mathrm{.}000$

$30\mathrm{.}000$

$2\mathrm{.}100$

$32\mathrm{.}100$

$$90\mathrm{.}100$

$$56,000$

$48,000$

$8,000$

$2\mathrm{.}000$

$6\mathrm{.}000$

$3,100$

$2\mathrm{.}900$

$800$

$ $2,100$

$2019$

$ $3\mathrm{.}800$

$1\mathrm{.}800$

$1\mathrm{.}600$

$200$

$200$

$7\mathrm{.}600$

$27\mathrm{.}000$

$$34\mathrm{.}600$

$ $9\mathrm{.}000$

$14\mathrm{.}000$

$23,000$

$10\mathrm{.}900$

$700$

$11\mathrm{.}600$

$$34\mathrm{.}600$

$$44\mathrm{.}000$

$35\mathrm{.}000$

$9\mathrm{.}000$

$7,000$

$2,000$

$800$

$1,200$

$500$

$700$