Question

CHAPTER CASE
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 company’s financial records are not well maintained.
The initial investment in Sunset Boards was provided by Tad and his friends and family. Because the initial investment was relatively small, and the company has made surfboards only for its own store, the investors haven’t required detailed financial statements from Tad. But 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 as supplying his “sticks” (surfer lingo for boards) to other sellers.
Tad’s 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 has previously prepared. At the urging of his investors, Tad has hired financial analyst Paula Wolfe to evaluate the performance of the company over the past year.
After rooting through old bank statements, sales receipts, tax returns, and other records, Paula has assembled the following information:

Answer 1

The income statement of S board is as follows S Boards Income statement Particulars 2013 2014 Sales Less: Cost of goods sold Gross profit Less: Selling and general administrative e Less Earnings before interest and tax (EBIT) Less: Interest Earnings before tax (EBT) Less: Tax (20% of EB Net income Less: Dividends Retained earning 333.426.00 406.427.00 169,969.00 214.607.00 163.457.00 191.820.00 es 33.425.00 43.626.00 47.980.00 54.230.00 82,052.00 93.964.00 10.442.00 11.954.00 71,610.00 82,010.00 14.322.00 16.402.00 57.288.00 65.608.00 28.644.00 32.804.00 28.644.00 32.804.00 eciation 2. The balance sheet of S board is as follows S Boards Balance sheet Liabilities 2013 91,559.00 140,363.00 Cash 2014 Assets 2013 24.524.00 26,056.00 2014 Owner's Retained earings 28,644.00 32,804.00 Accounts recevable 17,378.00 22,542.00 Accounts payable43,344.0048,090.00 Inv Notes payable Long-term debt106.848.00 119976.00 Total 36,570.00 50,185.00 211,680.00 264,021.00 19,757.00 21,571.00 Net fixed assets 290152.00 362,804.00 Total 290,152.00 362,804.00 **Owner's equity Total assets-Total debt

Calculate the operating cash flow as follows: Operating cash flow = Net income+ Depreciation 2013 2014 Net income Add Depreciation Operating cash flow 57,288.00 65.608.00 47,980.0054,230.00 105,268.00 119,838.00 4. Calculate the cash flow from assets as follows Operating cash flow Cash flow from assetsChange in net working capital Net caital spending 2013 2014 Operating cash flow Change in net working capital Net capital spending Cash flow from assets 105,268.00 119,838.00 140363 13,709.00 20,525.00 91559