Reference no: EM133068957
Situation: Congratulations! You have been hired by IanCo Industries - a mid-sized business with a wide-range of interests and holding. You will serve as a Senior Financial Analyst, supporting the CFO, Walter Oliver ("Wally"). In this role, you will be executing customized analysis and special projects for Wally. It is a great opportunity to learn and contribute. Wally has already lined up a number of projects for you. Can you help him?
1) Financial statement production and review
(a) Wally has provided the information below - and asked you to create an Income Statement and Balance Sheet for IanCo for the year ended December 31, 2019. (Income Statement = 5 marks and Balance Sheet = 7.5 marks).
I. Sales were $850,000
II. Gross profit margin was 60%
III. Operating margins were 10%
IV. The Bank of Toronto provided a loan on Jan 1, 2019 worth $300,000. The annual interest is 8% and is compounded annually. Interest only payments are needed - until the loan is due in 10 years, where a balloon payment for the full balance must be paid.
V. The combined federal and provincial tax rates is 25%
VI. Wally knows that the ending cash balance in his company is 200,000.
VII. Accounts Receivables is 20% of sales
VIII. Inventory is 15% of sales
IX. Accounts Payable is 5% of sales
X. Accrued expenses payable is 5.5% of sales
XI. Capital equipment purchases were made at the start of the year. These total $50,000. These depreciate at 10% per year
XII. The owner will provide all other capital in the form of equity financing
XIII. Wally has asked you to figure out his SG&A (Selling General and Administrative expenses).
(b) Wally asks you to create an Income Statement for 2020 using the information below (5 marks)
I. 2020 sales were 130% of last year's sales
II. Gross profit margin was 55%
III. Operating profit margins were 15%
IV. Interest expense fell to 7%, given a change in interest rates
V. The tax rate was 30%
(c) Based on the change in Income between 2020 and 2019, how would you say IanCo is doing?