Use the information in Chapter 2 Case of your textbook. Based on your analysis how should sunset proceed? Answer the group of six questions and the two questions at the end.

Chapter 2 Case study: Cash Flows and Financial Statements at Sunset Boards, Inc

Sunset Boards is a small company that manufactures and sells surfboards in Malibu. Tad Marks, the founder of the company, is in charge of the design and sale of the surfboards, but his background is in surfing, not business. As a result, the companys financial records are not well maintained

Tad and his friends and family provided the initial investment in Sunset Boards. Because the initial investment was relatively small, and the company has made surfboards only for its own store, the investors have not required detailed financial statements from Tad. However, thanks to word of mouth among professional surfers, sales have picked up recently, and Tad is considering a major expansion. His plans include opening another surfboard store in Hawaii, as well supplying his sticks (surfer lingo for boards) to other sellers.

Tads expansion plans require a significant investment, which he plans to finance with a combination of additional funds from outsiders plus some money borrowed from banks. Naturally, the new investors and creditors require more organized and detailed financial statements than Tad as previously prepared. At the urging of his investors, Tad as hired financial analyst Paula Wolfe to evaluate the performance of the company of the past year.

After rooting through old bank statements, sales receipts, tax returns, and other records, Paula has assembled the following information:

	2009	2010
Cost of Goods Sold	$141,641	$178,839
Cash	20,437	30,880
Depreciation	39,983	45,192
Interest Expense	8,702	9,962
Selling & Administrative Expenses	27,854	36,355
Accounts Payable	36,120	40,908
Net Fixed Assets	176,400	214,184
Sales	277,855	338,688
Accounts Receivable	14,482	18,785
Notes Payable	16,464	17,976
Long-term Debt	89,040	102,480
Inventory	30,475	41,821
New Equity	-	16,800

Sunset Boards current pays out 50 percent of net income as dividends to Tad and the other original investors, and has a 20 percent tax rate. You are Paulas assistant, and she has asked you to prepare the following:

An income statement for 2009 & 2010

A Balance Sheet for 2009 & 2010

Operating cash flow for each year

Cash Flow from Assets for 2010

Cash flow from creditors for 2010

Cash flow to stockholders for 2010

Question 1: How would you describe Sunset Boards cash flow for 2010? Write a brief discussion.

Question 2: In light of your discussion in the previous question, what do you think about Tads expansion plans?