Reference no: EM132173610

Entrepreneurial Finance Assignment -

Task One - Explain how and why business plans of new ventures (i.e. start-ups) differ from the business plans of more established businesses (i.e. mature). Answer should be between 150 to 300 words in length.

Task Two - Sandra has noted that her business texts focused on the preparation of pro-forma statements for established businesses with several years of historical information on which to base their projections. She does not know how to prepare forecasts for a completely new business.

Required: Assume that Sandra has turned to you for advice on how to prepare pro-forma income statements and statements of financial position for her fashion boutique. Describe to Sandra how these statements can be prepared. Appropriate examples may be used to aid your description. Answer should be between 250 to 500 words in length.

Task Three - Researchers at Leeds University, have created a washing machine that uses 90% less water than traditional machines. Xeros the company that will bring this machine to market is a spin-out from the commercial activities of Leeds University. The patented technology cleans clothes with reusable nylon polymer beads. These beans last for about six months before they need to be replaced. Besides being "almost waterless", the machine uses much less detergent as well as 30 % less energy since the need to "tumble dry" is eliminated. The machine is currently undergoing advanced prototyping to prepare for commercial launch.

Required: The management of Xeros has approached you to recommend financial ratios that can be currently used to discern whether the company is maintaining sufficient assets to meet their short term obligations. Explain and justify the recommended ratios. Answer should be between 150 to 300 words in length.

Task Four - Following are two years of income statements and balance sheets for the Munich Exports Corporation.

Statement of Financial Position	2019	2020
Cash	$ 50,000	$ 50,000
Accounts Receivable	200,000	300,000
Inventories	450,000	570,000
Total Current Assets	700,000	920,000
Fixed Assets (Net)	300,000	380,000
Total Assets	1,000,000	1,300,000
Accounts Payable	130,000	180,000
Accruals	50,000	70,000
Bank Loan	90,000	90,000
Total Current Liabilities	270,000	340,000
Long-term loan	400,000	550,000
Common Stock & Paid-in Capital	250,000	250,000
Retained Earnings	80,000	160,000
Total liabilities & equity	1,000,000	1,300,000
Income Statement	2019	2020
Net Sales	1,300,000	1,600,000
Cost of Sales	780,000	960,000
Gross Profit	520,000	640,000
Marketing	130,000	160,000
General & Administrative	150,000	150,000
Depreciation	40,000	55,000
EBIT	200,000	275,000
Interest	45,000	55,000
EBT	155,000	220,000
Tax (40%)	62,000	88,000
Net Income	93,000	132,000

Required:

1. Calculate the cash build, cash burn, and net cash burn or build for Munich Exports in 2020.

2. Assume that 2021 will be a repeat of 2020. If your answer in Part 1 resulted in a net cash burn position, calculate the net cash burn monthly rate and indicate the number of months remaining "until out of cash." If your answer in Part A resulted in a net cash build position, calculate the net cash build monthly rate and indicate the expected cash balance at the end of 2021.

3. Calculate the length of Munich Exports' cash conversion cycle for 2020.