1. Your new boss Wally Oliver is pleased with your work! He has given you another assignment. It is Dec 31, 2015 and Wally asks you to create financial statements for a new company owned by Lexi Holding. The company, called Madi Sporting Goods, started operations Jan 1, 2015 and sells sports equipment. Given that you want to keep your job and that you like doing this stuff - you agree. Through discussions with Wally and documents he provides to you, you get much information. This information is listed below. Wally asks that you compile an income statement and balance sheet.
   • Sales were $1,000,000 in 2015
   • Gross profit margin was 60%
   • Operating margins were 12%
   • The Bank of Toronto provided a loan on Jan 1, 2015 worth $300,000. The annual interest is 8% and is compounded annually. Interest only payments are needed until the loan is due in 10 years, where a balloon payment for the full balance must be paid.
   • The combined federal and provincial tax rates is 27%
   • The ending cash balance in Madi Sporting Goods is 200,000.
   • Accounts Receivables is 10% of sales
   • Inventory is 15% of sales
   • Accounts Payable is 5% of sales
   • Accrued expenses payable is 5.5% of sales
   • Capital equipment purchases were made at the start of the year. These total $50,000. These depreciate at 10% per year
   • Lexi Holdings owner, Mr. X, provided all other capital in the form of equity financing
   • Wally asks you to figure out his SG&A (Selling General and Administrative expenses).

2. It is December 31, 2016 and Wally needs your help again. He wants you to create his Income Statement for 2016. Please use the following information to create the 2016 Income Statement.
   • 2016 sales were 125% of 2015 sales
   • Gross profit margin was 55%
   • Operating profit margins were 15%
   • Interest expense fell to 7%, given a change in interest rates
   • The tax rate was 30%
3. Wally says that Lauren created the Balance Sheet for December 31, 2016. Wally asks you to use the Income Statement you created (in 2 above) and the Balance Sheet Lauren created (in appendix B1) to complete a cash flow statement. You agree to create a cash flow statement for 2016. Note you will need to figure out how much was paid out to Lexi Holdings as a dividend. Finally, he asks you to share any observations you might have on Madi Sporting Goods based on what you have put together.

2014 2015 2016 Appendix A2: RetroSpin Records Comparative Balance Sheet ($M) For the Years Ended Dec 31, 2013 to 2016 2013 2014 2015 2016 Cash US$ 2,05 US$ 2,21 US$ 2,19 US$ 3,48 A/R US$ 1,02 US$ 1,10 US$ 1,09 US$ 1,74 avg Inventory US$15,00 US$15,75 US$17,33 US$19,06 avg Total Current Assets US$18,07 US$19,06 US$20,60 US$24,28 Land, Plant and Equipment US$10,86 US$32,46 US$36,84 US$35,60 avg Other Assets US$ 0,49 US$ 1,08 US$ 1,68 US$ 1,76 Total Assets US$29,43 US$52,60 US$59,11 US$61,65 avg US$ 1,06 US$ 1,10 US$ 1,42 US$15,38 US$16,54 US$18,19 US$21,66 US$34,65 US$36,22 US$ 0,79 US$ 1,38 US$ 1,72 US$41,01 US$55,86 US$60,38 US$17,88 US$23,72 US$22,21 A/P US$10,75 US$25,00 US$22,43 US$21,99 avg Current Portion of LT Debt US$ 0,58 US$ 0,58 US$ 0,58 US$ 0,58 Total Current Liabilities US$11,33 US$25,58 US$23,01 US$22,57 Long-term Debt US$10,56 US$10,56 US$10,56 US$10,56 Total Liabilities US$21,89 US$36,14 US$33,57 US$33,13 Shareholders' Equity US$ 7,54 US$16,46 US$25,54 US$28,51 avg Total Liabilities and Equities US$29,43 US$52,60 US$59,11 US$61,65 US$12,00 US$21,00 US$27,03 US$ 8,92 US$ 9,09 US$ 2,97 Appendix A1: RetroSpin Records Comparative Income Statement ($M) For the Years Ended Dec 31, 2013 to 2016 2013 2014 2015 2016 Sales US$75,00 US$78,75 US$86,63 US$95,29 Cost of Goods Sold US$41,94 US$44,03 US$46,24 US$48,55 Gross Profit US$33,06 US$34,72 US$40,39 US$46,74 Selling and Administration US$18,75 US$17,72 US$17,33 US$19,06 Depreciation US$ 1,51 US$ 2,71 US$ 4,31 US$ 4,18 Operating Profit US$12,81 US$14,29 US$18,76 US$23,50 Interest US$ 1,88 US$ 2,51 US$ 7,10 US$ 4,93 Earnings Before Taxes US$10,92 US$11,78 US$11,65 US$18,57 Taxes US$ 2,73 US$ 2,95 US$ 2,95 US$ 2,91 US$ 2,91 US$ 4,64 Net Income US$ 8,19 US$ 8,84 US$ 8,74 US$13,93 tax rate 1 - tax rate Net Income + |(1-tax rate) 25% 25% 25% 25% 75% 75% 75% 75% US$ 9,60 US$10,72 US$14,07 US$17,63 Appendix A3: Industry Averages RetroSpin Records 2016 Current Ratio Cash Ratio Inventory Turnover (days) A/R Turnover (days) A/P Turnover (days) Cash Conversion Cycle Fixed Assets Turnover Total Assets Turnover Debt Ratio Times Interest Earned Gross Profit Margin Operating Profit Margin Net Profit Margin Return on Assets Return on Equity 1,35 0,25 40,12 34,5 50,1 15,35 3,5 1,75 0,5 10,5 28,00% 12,00% 7,50% 15,50% 37,50%