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| Mandrake Motorcycles - Balance Sheets | | | | | |
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| | 31-Dec-17 | 31-Dec-18 | | | | |
| Assets | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | $ 240,000 | $ 425,000 | | | | |
| Accounts receivable | $ 185,000 | $ 200,000 | | | | |
| Inventory | $ 850,000 | $ 630,000 | | | | |
| Other current assets | $ 200,000 | $ 210,000 | | | | |
| Total current assets | $ 1,475,000 | $ 1,465,000 | | | | |
| Property, plant and equipment, net | $ 1,075,000 | $ 1,175,000 | | | | |
| Total assets | $ 2,550,000 | $ 2,640,000 | | | | |
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| Liabilities | | | | | | |
| Current liabilities: | | | | | | |
| Accounts payable | $ 260,000 | $ 205,000 | | | | |
| Short term debt payable | $ 370,000 | $ 320,000 | | | | |
| Other current liabilities | $ 285,000 | $ 280,000 | | | | |
| Total current liabilities | $ 915,000 | $ 805,000 | | | | |
| Long term debt | $ 195,000 | $ 410,000 | | | | |
| Total liabilities | $ 1,110,000 | $ 1,215,000 | | | | |
| Stockholders equity: | | | | | | |
| Common stock | $ 1,325,000 | $ 1,325,000 | | | | |
| Retained earnings | $ 115,000 | $ 100,000 | | | | |
| Total stockholders equity | $ 1,440,000 | $ 1,425,000 | | | | |
| Total liabilities and stockholders equity | $ 2,550,000 | $ 2,640,000 | | | | |
| Mandrake Motorcycles - Income Statements | | | | |
| | Year End 12/31/17 | Year End 12/31/18 | | | | |
| Nets sales | $ 1,590,000 | $ 1,690,000 | | | | |
| Cost of goods sold | $ 980,000 | $ 1,175,000 | | | | |
| Gross margin | $ 610,000 | $ 515,000 | | | | |
| Operating expenses: | | | | | | |
| Selling expenses | $ 300,000 | $ 210,000 | | | | |
| General and administrative expenses | $ 210,000 | $ 200,000 | | | | |
| Total operating expenses | $ 510,000 | $ 410,000 | | | | |
| Operating income | $ 100,000 | $ 105,000 | | | | |
| Interest expense | $ 48,000 | $ 72,000 | | | | |
| Income before taxes | $ 52,000 | $ 33,000 | | | | |
| Income taxes | $ 18,200 | $ 11,550 | | | | |
| Net income | $ 33,800 | $ 21,450 | | | | |
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| PROBLEM 14-10. Comprehensive Financial Statement Analysis [LO 1, 3] | | | |
| Marty Monk Fisher | | | | | |
| owns the largest motorcycle dealership in southern Ohio. Recently, he was approached by Bob | |
| Sherman, founder of Mandrake Motorcycles, and offered the opportunity to be the sole distribu- | |
| tor of Mandrake bikes in the state. Acceptance of the offer will require Monk to open a dedicated | |
| Mandrake showroom and repair facility and, obviously, stock Mandrake cycles and parts. Monk | |
| is quite impressed by the Mandrake product, but before making a major investment, he wants to | |
| be confident that the company will be around for the long haul. Accordingly, he has asked you to | |
| analyze the audited financial statements of Mandrake for the previous 2 years. | | | |
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| a. | | | | | | |
| Prepare a horizontal and a vertical analysis of the 2018 and 2017 financial statements. | | |
| b. | | | | | | |
| Calculate the following ratios for 2018 and 2017: return on assets, gross margin percentage, | | |
| receivables turnover, days sales in receivables, inventory turnover, days sales in inventory, debt to | |
| equity, and times interest earned. | | | | | |
| c. | | | | | | |
| Based on your analysis in parts a and b, comment on any matters that Monk should probe in an | |
| upcoming meeting with Bob Sherman from Mandrake. | | | | |
| d. | | | | | | |
| Based on the limited information available, do you think Monk should open a Mandrake | | |
| showroom? | | | | | |
