Andesite Technologies, Inc. designs and manufactures specialized motorized bicycles for the burgeoning eco-mobility market.
Series A Shareholder has asked and received Board approval (as of today) for Andesite to pay a dividend to Series A shareholder assuming that Days Cash on Hand ratio for the balance sheet (Cash/(operating expenses/365 days)) equals 90 days.
The Series A investor wants to know whether they can they can expect a dividend in 2020 and/or 2021 and if so, how much for each year?
As the Company’s CFO, the Board has asked you to prepare a projected income statement, balance sheet and cash flow statement for FYE 12/31/2020 and FYE 12/31/21. (Assume that there are 365 days in both years) to determine whether and/or when (at the end of which years) the company can pay its Series A shareholder a dividend.
(All numbers in thousands same as financial statements)
For 2020 You assume the following:
Income statement:
i. Revenues of $7,000
ii. Gross margin = 33%
iii. Other RATIOS same as 2019
Balance sheet:
iv. Days Cash on Hand (Cash/(operating expenses/365 days)) must equal 90 days at year end (Line 69)
v. Other 2020 balance sheet RATIOS remain the same as 2019
Questions:
1. Prepare projected 2020 financial statements in column D of the Problem tab under the headings “Projected FYE 12/31/2020”.
2. Will Andesite generate enough cash to support operations in 2020 without any additional cash put into company (from debt or equity) – yes or no? (cells D111 or D113)
3. (cell B111 or cell(s) in 2020 cash flow statement)
If YES, provide the amount of the dividend in cell. Assume all excess cash (cash not required for working capital) paid out to Series A shareholder.
If NO, indicate size bank loan in cell D102 that would be required in 2020 to support operations assuming company needs to maintain 90 Days Cash on Hand per the assumptions? Make sure you adjust financial statements to appropriately reflect loan. (Hint- look at balance sheet)
For 2021 You assume the following:
a. Your statements for 2021 start with and reflect your 2020 projected statements including any debt or equity added to balance sheet
b. 2021 Income statement assumptions:
i. Revenues of $12,000
ii. RATIOS same as 2020
c. 2021 Balance sheet: assumptions
iii. Days Cash on Hand (Cash/(operating expenses/365 days)) must equal 90 days at year end (same as 2020)
iv. Company believes it can improve its working capital management to:
a. Reduce “Accounts Receivable in Days of Revenue” to 45 days
b. Reduce “Inventory in Days of COGS” to 60 days
c. And get away with Increasing its “Accounts Payable in Days of Cost of Sales” to 40 days
v. Other balance sheet RATIOS remain the same as 2020
Questions:
4. Prepare projected 2021 financial statements in column E of the Problem tab under the headings “Projected FYE 12/31/2021”.
5. Will Andesite generate enough cash to support operations in 2021 if there are no changes to debt or equity – yes or no? (Cell E111 or E113)
6.
If YES, provide the amount of the dividend in cell. Assume all excess cash (cash not required for working capital) paid out to Series A shareholder.
If NO, indicate size bank loan in cell E102 that would be required in 2020 to support operations assuming company needs to maintain 90 Days Cash on Hand per the assumptions? Make sure you adjust financial statements to appropriately re