MINTCASE Cash Flows and Financial Statements at Sunset Boards, Inc. Sunset Boards is a small company that manufactures and sells After rooting through old bank statements, sales receipts, surfboards in Malibu. Tad Marks, the founder of the company, tax returns, and other records, Christina has assembled the is in charge of the design and sale of the surfboards, bur his following information: background is in surting. not business. As a resul, the compa- ny'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 2017 2018 was relatively small, and the company has made surtboards Cost of goods sold S255,605 $322,742 only for its own store, the investors haven't required detailed Cash 36,884 55.725 financial statements from Tad, But thanks to word of mouth Depreciation 72.158 91.559 among professional surfers, sales have picked up recently, and Interest expense 15.687 17,980 Tud is considering a major expansion. His plans include open- Selling and administrative 50.258 65,610 ing another sur bourd store in Hawaii, as well as supplying his sticks" (surter lingo for boards) to other sellers. Accounts payable 26,186 44,318 Tad's expansion plants require a significant investment. Net fixed assets 318,345 387,855 which he plans to finance with a combination of additional Sales 501,441 611,224 funds from outsiders plus some money borrowed from banks. Accounts receivable 26,136 Naturally, the new investors and creditors require more orga Notes payable 29,712 32.441 mized and detailed financial statements than Tad has previously Long Term debt 160,689 175.340 prepared. At the urging of his investors, l'ad has hired finan- Inventory 50,318 67,674 cial analyst Christina Wolle to evaluate the performance of the New equity 0 19.500 company over the past year 33,901 48 PART 1 Overven of Corporate Finance QUESTIONS 1. How would you describe Sunset Boards's cash flows for 2018? Write a brief discussion 2. In light of your discussion in the previous question, what do you think about Tad's expansion plans? Sunset Roards currently pays out 40 percent of net income as dividends to Taud and the other original investors, and it has a 21 percent tax rate. You are Christina's assistant, and she has asked you to prepare the following: 1. An income statement for 2017 and 2018 2. A balance sheet for 2017 and 2018 3. Operating cash flow for each year 4. Cash flow from assets for 2018 5. Cash flow to creditors for 2018 6. Cash flow to stokholders for 2018, MINTCASE Cash Flows and Financial Statements at Sunset Boards, Inc. Sunset Boards is a small company that manufactures and sells After rooting through old bank statements, sales receipts, surfboards in Malibu. Tad Marks, the founder of the company, tax returns, and other records, Christina has assembled the is in charge of the design and sale of the surfboards, bur his following information: background is in surting. not business. As a resul, the compa- ny'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 2017 2018 was relatively small, and the company has made surtboards Cost of goods sold S255,605 $322,742 only for its own store, the investors haven't required detailed Cash 36,884 55.725 financial statements from Tad, But thanks to word of mouth Depreciation 72.158 91.559 among professional surfers, sales have picked up recently, and Interest expense 15.687 17,980 Tud is considering a major expansion. His plans include open- Selling and administrative 50.258 65,610 ing another sur bourd store in Hawaii, as well as supplying his sticks" (surter lingo for boards) to other sellers. Accounts payable 26,186 44,318 Tad's expansion plants require a significant investment. Net fixed assets 318,345 387,855 which he plans to finance with a combination of additional Sales 501,441 611,224 funds from outsiders plus some money borrowed from banks. Accounts receivable 26,136 Naturally, the new investors and creditors require more orga Notes payable 29,712 32.441 mized and detailed financial statements than Tad has previously Long Term debt 160,689 175.340 prepared. At the urging of his investors, l'ad has hired finan- Inventory 50,318 67,674 cial analyst Christina Wolle to evaluate the performance of the New equity 0 19.500 company over the past year 33,901 48 PART 1 Overven of Corporate Finance QUESTIONS 1. How would you describe Sunset Boards's cash flows for 2018? Write a brief discussion 2. In light of your discussion in the previous question, what do you think about Tad's expansion plans? Sunset Roards currently pays out 40 percent of net income as dividends to Taud and the other original investors, and it has a 21 percent tax rate. You are Christina's assistant, and she has asked you to prepare the following: 1. An income statement for 2017 and 2018 2. A balance sheet for 2017 and 2018 3. Operating cash flow for each year 4. Cash flow from assets for 2018 5. Cash flow to creditors for 2018 6. Cash flow to stokholders for 2018