Business, 13.04.2020 20:10 daplol22222
Red Rose is a small company that manufactures and sells silk carpets in Abu Dhabi. Hamdan Saeed, the founder of the company, is in charge of the design and sale of the carpets, but his background is only in making carpets, not business. As a result, the company’s financial records are not well maintained.
The initial investment in Red Rose was provided by Hamda and his family. Because the initial investment was relatively small, and the company has made carpets only for its won store, the investors haven’t required detailed financial statements from Hamdan. However, because the quality of the carpets is very good, sales of the carpets have increased rapidly in the recent months and Hamdan is considering a major expansion. His plans include opening another store in Dubai, as well as selling his carpets to other customers in Saudi Arabia.
Hamdan’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. The new investors and banks require Hamdan to provide them with more organized and detailed financial statements than he has previously prepared. In order to do that, Hamdan has hired a financial analyst, her name is Maryam Ahmed (she holds a bachelor degree in finance from ADU University). He asked Maryam to evaluate the performance of the company over the past year. After going through all the bank statements, sales receipts, tax returns, and other records, Maryam has assembled the following information:
2018 2019
Cost of goods Sold $224,359 $283,281
Cash 32,372 34,394
Depreciation 63,334 71,584
Interest expense 13,783 15,780
Selling and Administrative expense 44,121 57,586
Account payable 57,220 63,479
Net fixed assets 270,212 348,508
Sales 440,122 536,483
Account receivable 22,939 29,755
Notes payable 25,100 28,474
Long term debt 141,040 158,368
Inventory 48,272 65,050
New equity 0 27,157
Red Rose currently pays out 49 percent of net income as dividends to Hamdan and other original investors and has a 20 percent tax rate. You are working with Maryam, and she asked you to prepare the followings:
1. Income statement for 2018 and 2019.
2. A balance sheet for 2018 and 2019.
3. Operating cash flow for 2018 and 2019.
4. Cash flow from assets for 2019.
5. Cash flow to creditors for 2019.
6. Cash flow to stockholders for 2019.
Questions:
1. After preparing all of these requirements, how would you describe Red Rose’s cash flow for 2019? Write your opinion.
2. Based on your analysis, what do you think about the expansion decision taken by Hamdan?
Answers: 3
Business, 22.06.2019 04:30
Jennifer purchased a house in a brand new development in the outskirts of town. when her house was built, the nearest fire department was nearly 20 miles away. as her neighborhood developed, the density of the community called for a new fire department 1.5 miles away. what effect will the new fire station have on her homeowners insurance premium? a. a new fire department will be more demanding on local taxes. her annual premium will go up. b. the location of a fire department has no bearing on the value of her house. her annual premium will stay the same. c. the new fire department will reduce the risk of financial loss in her home. her annual premium should decrease. d. with a fire department so close (less than 5 miles), financial risk on jennifer’s home practically disappears. she will not need to pay insurance anymore.
Answers: 1
Business, 22.06.2019 16:00
Advanced enterprises reports year-end information from 2018 as follows: sales (160,250 units) $968,000 cost of goods sold 641,000 gross margin 327,000 operating expenses 263,000 operating income $64,000 advanced is developing the 2019 budget. in 2019 the company would like to increase selling prices by 14.5%, and as a result expects a decrease in sales volume of 9%. all other operating expenses are expected to remain constant. assume that cost of goods sold is a variable cost and that operating expenses are a fixed cost. should advanced increase the selling price in 2019?
Answers: 3
Business, 23.06.2019 00:10
Special order carson manufacturing, inc., sells a single product for $36 per unit. at an operating level of 8,000 units, variable costs are $18 per unit and fixed costs $10 per unit. carson has been offered a price of $20 per unit on a special order of 2,000 units by big mart discount stores, which would use its own brand name on the item. if carson accepts the order, material cost will be $3 less per unit than for regular production. however, special stamping equipment costing $4,000 would be needed to process the order; the equipment would then be discarded. assuming that volume remains within the relevant range, prepare an analysis of differential revenue and costs to determine whether carson should accept the special order. use a negative sign with answer to only indicate an income loss from special order; otherwise do not use negative signs with your answers.
Answers: 2
Red Rose is a small company that manufactures and sells silk carpets in Abu Dhabi. Hamdan Saeed, the...
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