Financial analysis project, Financial Management

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Financial Analysis Project:

  1. At the beginning of 2009, CanGo purchased the online gaming company. This purchase was for cash, paid for through the proceeds of the IPO and results in goodwill.
  2. 90% of the online book sales comes from JIT, the other 10% through the inventory which CanGo possesses. 100% of the CD/DVD/MP3 come through CanGo inventory. The result is that 80% of ALL sales is JIT and 20% is inventory.
  3. There is one warehouse for shipping of books and one plant for manufacturing.
  4. There are three divisions: a CD/DVD/MP3 division, an online gaming division and a books division. All manufacturing takes place in the CD/DVD/MP3 division.
  5. The IPO took place at the beginning of 2009.
  6. The CD/DVDs were customized beginning in 2008. The MP3 players were built beginning in the start of 2009.
  7. The online gaming company was purchased for $30,000,000 and both Elizabeth and Andrew initiated the process.
  8. The company began in 2006, has a VC infusion in 2007 and 2008. It showed a profit in 2008 and 2009. Its only profitable division is the online book sales division.
  9. It has some type of international operations, hence the need for a "translation gain or loss" in owner's equity.
  10. It has an extraordinary loss from fire and a sale of a segment of its business in 2009.

Balance Sheet

ASSETS

December 31, 2009


Cash

$20,900,000


Marketable Securities

$117,000,000


Accounts Receivable

$33,000,000


Less: Allowance for Bad Debts

$(880,000)


Net Accounts Receivable

$32,120,000





Inventory



Raw Materials

$2,000,000


Work-in-process

$1,000,000


Finished Goods

$5,000,000


Inventory Purchased for Resale

$24,000,000


Total Inventory

$32,000,000





Plant, Property and Equipment

$6,700,000


Less: Accumulated Depreciation

$(320,000)


Net Plant, Property and Equipment

$6,380,000





Prepaid Expenses

$200,000





Goodwill and Other Purchased Intangibles

$28,000,000


Less: Amortization

$(700,000)


Net Goodwill and Other Purchased Intangibles

$27,300,000





Total Assets

$235,900,000



LIABILITIES AND OWNERS' EQUITY

Accounts Payable

$22,000,000


Accrued Advertising

$11,800,000


Other Liabilities and Accrued Expense

$1,400,000


Current Portion of Long-Term Debt

$2,300,000





Long Term Debt

$57,400,000





Preferred Stock, $100 par value per share,



100,000 authorized, 0 shares issued and outstanding

$0





Common Stock, $1 par value per share,



250,000,000 shares authorized, 13,000,000 shares



issued, 12,900,000 outstanding

$13,000,000





Additional Paid-in-Capital in excess of par value, Common Stock

$117,000,000





Treasury Stock

$(1,000,000)





Retained Earnings (less Cash Dividends Paid)

$12,000,000

$11,000,000




Total Liabilities and Owner's Equity

$235,900,000



Income Statement


December 31, 2009

December 31, 2008

Sales Revenues

$51,000,000

$10,300,000

Less: Sales Returns

$(1,000,000)

$(300,000)

Net Sales Revenues

$50,000,000

$10,000,000

Less: Cost of Goods Sold

$(9,000,000)

$(4,000,000)

Gross Profit

$41,000,000

$6,000,000




Operating Expenses:



Advertising and Sales

$(26,000,000)

$(3,000,000)

Depreciation

$(160,000)


Salaries and Wages

$(1,700,000)

$(1,400,000)

Product Development

$(4,000,000)

$(1,200,000)

Merger and Acquisition Related Costs, including



Amortization of Goodwill and Other Intangibles

$(700,000)

$0

Total Operating Expenses

$(32,560,000)





Income from Continuing Operations Before Income Taxes

$8,440,000





Less: Income Taxes at 35%

$(2,954,000)


Income from Continuing Operations

$5,486,000





Discontinued Operations:



Income from Operations of Discontinued Division



(less applicable income taxes)

$350,000


Loss on Disposal of Discontinued Division



(less applicable income taxes)

$(150,000)


Total Gain from Discontinued Operations

$200,000





Extraordinary Items:



Loss from fire (less applicable income taxes)

$(200,000)





Net Income

$5,486,000



Divisional Revenues

Books

$15,000,000

$7,000,000

Online gaming

$25,000,000


Customized MP3/CD/DVD

$10,000,000

$3,000,000

Customized MP3/CD/DVD Inventory at end of 2009

$8,000,000



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