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Category > Accounting Posted 13 Jul 2017 My Price 25.00

Financial Management question help

Use the financial tables from the Stanford University’s guide to financial analysis and answer the following questions. Show your work for the following questions, each of which worth 10 points.

1) Identify two types of fixed costs from the income statement then add them up. Do it for both year 2000 and 2001. (Hint: fixed cost is independent of how many products are sold).

2) Calculate and compare the VCRR for Year 2000 and 2001. (Hint: VCRR= Variable Cost/Revenue)

3) Calculate the survival revenue Rotelli needed to break-even in 2000 and 2001. (Hint: Survival revenue = fixed cost / (1-VCRR)).

4) Did the restaurant have enough revenue to break-even in 2000 and 2001? (Hint: Compare the survival revenue with its actual revenue).

5) What did it do differently in 2001? (Hint: Look at the change of numbers in the income statement for both years).

6) How much cash did it burn or build between 2000 and 2001?

7) Calculate the monthly burn/build rate between 2000 and 2001.

8) If the cash flow activities continue into 2002, how many months will it run out of cash without additional financial injection?

9) Calculate the average current ratio between 2000 and 2001 and interpret it

10) Calculate the average quick ratio between 2000 and 2001.

THE ROTELLI’S RESTAURSNT

Balance Sheet

December 31, 2001, 2000

			Assets
			2001		2000
	Current Assets: ($)
	Cash		90,000		35,000
	Short-term inventories		200,000		28,000
	Account receivables		68,800		35,400
Inventories			104,000		95,000
Prepaid expenses			50,000		22,000

	Total Current Assets		504,800		215,400

	Fixed Assets:
	Property, plant, &equipment		2,750,000		1,900,000
	Less accumulated depreciation		325,000		200,000

	Net property, plan, & equipment		2,425,000		1,700,000

	Goodwill net		62,500		75,000

	Total Assets			2,992,300		1,990,400
		Liabilities & Owners’ Equity
	Current Liabilities
	Account payable		127,000		176,000
Current maturity of long-term debt			69,000		63,000
	Accrued payroll		50,000		38,000
	Income taxes payable		12,000		8,000
	Other accrued expenses		8,000		15,000

	Total Current Liabilities		266,000		300,000

	Long-Term Liabilities
	Long-term debt		1,326,000		1,389,000

	Total Liabilities		1,592,000		1,689,000

	Owners’ Equity
	Common stock		1,000		1,000
	Additional paid-in capital		1,350,000		400,000

	Retained earnings		49,300		(99,600)

	Total Owners’ equity		1,400,300		301,400

	Total Liabilities and Owners’ Equity			2,992,300		1,990,400

THE ROTELLI’S RESTAURANT

Income statement

For the Year Ended December 31, 2001, 2000

	2001	2000
Operating ($)
Sales	2,600,000	1,900,000
Cost of goods sold	820,000	680,000

Gross profit	1,780,000	1,220,000

Operating Expenses	1,010,000	750,000
General and Administrative	295,000	175,000
Depreciation and mortization	137,500	112,500

Total Operating Expenses	1,442,500	1,037,500

Operating Income	337,500	182,500

Non-Operating
Interest expense	125,0 00	131,000
Interest income	11,400	6,400

Income before taxes	75,000	57,900

Provision for income taxes	95,000	20,000

Net Income	$148,9 00	$37,900

THE ROTELLI’S RESTAURANT

Statement of Cash Flows

For the Year Ended December 31, 2001

		2001
	Cash flows from operating activities
	Net income	$148,900
	Adjustment:
	Depreciation & amortization	137,500
	Changes in assets and liabilities
	Accounts receivables	(25,400)
	Inventories	(9,000)
	Prepaid expenses	(28,000)
	Accounts payable	(49,000)
	Income taxes payable	4,000
	Accrued payroll	12,000
	Other accrued expenses	(7,000)

	Net Cash From Operating Activities	184,000

	Cash flows from Investing activities
	Short-term investments	(172,000)

	Addition to property, plant & equip.	(850,000)

	Net Cash used in investing activities	(1,022,000)

	Cash flows from financing activities
	Capital stock issue	950,000
	Short-term debt	6,000
	Long-term debt	(63,000)

	Net cash used by financing activities	893,000

	Net (decrease) increase in cash	55,000

	Cash, beginning of year	35,000

	Cash end of year	$90,000

Answers

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Status NEW Posted 13 Jul 2017 08:07 AM My Price 25.00

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