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Cash Burn and Build-Following are two years of income statements and balance sheets for the Munich Exports Corporation.
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MUNICH EXPORTS CORPORATION |
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BALANCE SHEET |
2009 |
2010 |
|
Cash |
$50,000 |
$50,000 |
|
Accounts receivable |
200,000 |
300,000 |
|
Inventories |
450,000 |
570,000 |
|
Total current assets |
700,000 |
920,000 |
|
Fixed assets, net |
300,000 |
380,000 |
|
Total assets |
$1,000,000 |
$1,300,000 |
|
Accounts payable |
$130,000 |
$180,000 |
|
Accruals |
50,000 |
70,000 |
|
Bank loan |
90,000 |
90,000 |
|
Total current liabilities |
270,000 |
340,000 |
|
Long-term debt |
400,000 |
550,000 |
|
Common stock ($0.05 par) |
50,000 |
50,000 |
|
Additional paid-in-capital |
200,000 |
200,000 |
|
Retained earnings |
80,000 |
160,000 |
|
Total liabilities and equity |
$1,000,000 |
$1,300,000 |
|
Income Statement |
|
|
|
Net sales |
1,300,000 |
$1,600,000 |
|
Cost of goods sold |
780,000 |
960,000 |
|
Gross profit |
520,000 |
640,000 |
|
Marketing |
130,000 |
160,000 |
|
General and administrative |
150,000 |
150,000 |
|
Depreciation |
40,000 |
55,000 |
|
EBIT |
200,000 |
275,000 |
|
Interest |
45,000 |
55,000 |
|
Earnings before taxes |
155,000 |
220,000 |
|
Income taxes (40% rate) |
$62,000 |
88,000 |
|
Net income |
$93,000 |
$132,000 |
A. Calculate the cash build, cash burn, and net cash burn or build for Munich Exports in 2010.
B. Assume that 2011 will be a repeat of 2010. If your answer in Part A resulted in a net cash burn position, calculate the net cash burn monthly rate and indicate the number of months remaining “until out of cash.” If your answer in Part A resulted in a net cash build position, calculate the net cash build monthly rate and indicate the expected cash balance at the end of 2011.