Water World Ltd. operates a waterslide park outside of a major Canadian city. The owner, your uncle, is in a bind since his brother, who usually prepares the operating and cash budgets, has unexpectedly left the company. Your mother, has recommended you to help since you are taking an accounting course and will have valuable skills that can help the family out. Your uncle has provided the following information: The water park is open from May through September and 60% of its sales are paid in cash, 30% are paid by credit card and 10% are school groups that are billed to the school divisions. Credit card companies deposit payment to Water World's corporate bank account the same day less a 1% processing fee. Admission fees billed to school groups are paid the following month. All expenses are paid the month they are incurred. The following projections have been completed to date (this table is also available in Excel Appendix A): 2021 Operating Year Projections May June July August September Sales $ 160,000 $ 210,000 $ 300,000 $ 300,000 $ 250,000 Staff costs S (43,200) $ (56,700) $ (81,000) $ (81,000) S (67,500) Operating Expenses S (54,400) $ (71,400) S (102,000) S (102,000) S (85,000) Depreciation expense $ (13,000) $ (13,000) S (13,000) S (13,000) $ (13.000) Pool supplies expense Expected attendance 6,880 9,030 12.900 12.900 10.750 The pool supply expense line is incomplete. Your uncle tells you that the park uses balanced chlorine kits to maintain the pools and slides at a cost of S250 per kit and the number needed is based on anticipated usage. He expects to use 10 in May, 20 in June, 40 in July, 40 in August and 20 in September but always wants to have 10% of next month's requirements on hand "just in case". There are 10 kits currently in inventory and he would like to have at least 5 kits at the end of the year. In addition, repairs are required to the slides in May at an estimated total cost of $125,000 (assume that this is classified as an expense). He also needs to pay $50,000 per operating month on the long-term, non- interest bearing loan (held by the previous owners - his parents who sold the business to him when they retired) and wants to pay a dividend in the amount of $25,000 each operating month, which he receives in lieu of a salary Water World Lad, has a $500.000 line of credit that can be drawn on for short-term financing. The line of credit balance is currently at zero and 5% annual interest is paid the following month on the outstanding balance at the end of the month; any excess cash is immediately used to pay down the line of credit. The cash balance is currently $40,000. Your uncle is also curious about horizontal analysis, vertical analysis and financial ratios and has provided a set of comparative financial statements and industry comparison numbers (Excel Appendix B). He would like you to analyze and explain the concepts of liquidity, solvency and profitability in a short report that includes your conclusions and any recommendations for improvement; please also include the current-year projections in the profitability ratio calculations. He is particularly interested if there is a way to generate more cash from the business. Your uncle understands that completing the operating budget, the cash budget and the financial statement analysis is a large undertaking and suggests that you get a few of your friends from school to help you and to ignore income taxes for now. In appreciation, you and your friends will receive complimentary admission to the waterpark and concessions vouchers for the full summer. It does look to be a hot summer and hanging out in a waterpark with your friends, once the work is done, sounds awesome. Time to call them up, convince them to help and get to work