Question

Silver Cloud Computing is a company that provides cloud computing services. The company commenced operations on...

Silver Cloud Computing is a company that provides cloud computing services. The company commenced operations on March 1, 2016. It acquired financing from the issuance of common stock for $40,000,000 and issuance of 4% bonds that mature in 2026 for $30,000,000. The income statements and balance sheets for the first two years are provided in a separate Excel spreadsheet. All amounts are in thousands.

           

Required:

The Chief Executive Officer (CEO) is interested in increasing sales and decreasing expenses. You have been requested to prepare a report that provides analysis of the financial statements and recommendations to improve the financial performance of the company. Your report should include the following items:

Prepare common sized financial statements for both years and provide comments on the differences between the years. Are there any areas of concern?

SILVER CLOUD COMPUTING
Income Statements
For the Years Ended February 28, 2018 and 2017
fye 2/28/2018 fye 2/28/2017
(in thousands) (in thousands)
Sales $            225,000 $            200,000
Sales Discounts                     3,375                     2,500
Net Sales                221,625                197,500
Wages and Salaries                  73,500                  70,000
Bad Debt Expense                     2,100                     2,000
Depreciation                  20,000                  20,000
Marketing Expense                  33,750                  30,000
Occupancy Expense                  54,000                  54,000
Research & Development                  22,500                  20,000
Total Expenses                205,850                196,000
Income from Operations                  15,775                     1,500
Interest Expense                     1,200                     1,200
Income Before Taxes                  14,575                        300
Income Taxes (40%)                     5,830                        120
Net Income $                8,745 $                    180
SILVER CLOUD COMPUTING
Balance Sheets
February 28, 2018 and 2017 and February 29, 2016
At Inception
Feb 28 2018 Feb 28 2017 Feb 29 2016
(in thousands) (in thousands) (in thousands)
Cash $              55,755 $       22,300.00 $        10,000
Accounts Receivable                  18,000                 16,000                        -
Net Computer Equipment                  20,000                 40,000             60,000
Total Assets $              93,755 $             78,300 $        70,000
Accounts Payable $                9,000 $               8,000 $                  -  
Taxes Payable                     5,830                       120                        -
Long-term Debt                  30,000                 30,000             30,000
Common Stock                  40,000                 40,000             40,000
Retained Earnings                     8,925                       180                        -
Total Liabilities & Stockholders Equity $              93,755 $             78,300 $        70,000

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