Reference no: EM132964765

1) Construct Financial Statements using Excel.

Your group's Job is to fill out the values for the years 2014 (current) and the 2015 (projected) in the Statement of Income and Statement of Financial Position (fill all the green cells). If no information is given about a particular value assume it is the same as last years. Pay close attention to the potential sources of financing, adjust the Statement of Income and Statement of Financial Position accordingly in excel. When you are finished with the Excel Document save it as Group#ABCCorpA1. All Values shown in Excel are in thousands of dollars.

2) Ratio Analysis (Read the CASE and complete step 1 FIRST)

Calculate and analyze the following Ratios for the years 2014 and 2015. What do you notice about the change in these Ratios? Provide a brief explanation for the reason of the change, or whether the Ratios below should be any cause for concern.

Current Ratio, Return on Assets , Quick Ratio, Net Working Captial

3) Discussion Questions (Read the CASE and complete step 1 FIRST)

i) Did you decide to Rent or Buy the Warehouse? Why? (Hint: Compare the cost of financing)

ii) In the Statement of Financial Position explain why there are only zero's at the bottom, what does this signify? (Located on sheet 2 Row 47 in the excel file).

i) Explain your team's plan to finance the purchase of the additional inventory and warehouse? What is the total cost of the expansion? What is the total cost of financing for the expansion? (Hint: The company has been preapproved for a short-term loan, as well as has access to retained earnings from the previous year It is currently Q4 in 2014 and ABC corporation has placed your team in charge of preparing the company's Income Statement and Balance Sheet (Statement of Financial Position) for 2014, as well as the projected statements for 2015. You are told that sale revenue has increased 6% from the 2013 values. ABC Company also plans to expand their inventory to meet growing demand and they forecast sales revenue to increase by 35% in 2015 (from current values). 40,045.00$ of additional purchases were made in 2014 (Paid for with Retained Earnings), with another 230,545.00 planned to be purchased in the future to expand inventory in 2015. Along with the increase in inventory, Freight expenses are expected to double. ABC has been preapproved a short-term loan in the amount of $100,000 today to be repaid in full at the end of 2015 to finance this expansion, the rest will be paid for using the companies Retained Earnings. The total financing cost of the loan will be $9,500. Labour cost is expected to be the same as last year and are expected to increase by 15% in 2015. ABC is also planning to hire 2 new employees on salary, one for Distribution and one as Administrative staff in 2015, they will be paid $40,000/year each. Commissions are expected to increase by $30,000 in 2015.

Plant Property and equipment are also the same as last year (2013), however, in the coming year (2015) the company is faced with a choice to buy or rent a warehouse to house the additional inventory. The building may be purchased outright for 350,000$ or leased on a one-year term for $90,000 spilt into 12 equal monthly payments.

Assume a 15% down-payment is required to buy the land, with payments made monthly amortized over 25 years, and the interest rate on the mortgage is fixed at 2.5%. Whether you decid to rent or buy the land is up to your team to decide, either way provide a rationale and adjust your financial statements for the projected year accordingly.

**If you choose 'buy', add the principal payments of the loan for 12 months and include them in the "current portion of long term debt" cell in the Statement of Financial Position.

Add the total financing cost of the loan (interest portion less the principal) for 12 months and add to existing financing costs (Cell A35) in the Statement of Income