Red Rose is a small company that manufactures and sells silk carpets in Abu Dhabi. Hamdan Saeed, the founder of the company, oversees the design and sale of the carpets, but his background is only in making carpets, not business. As a result, the company’s financial records are not well maintained.
The initial investment in Red Rose was provided by Hamda and his family. Because the initial investment was relatively small, and the company has made carpets only for its own store, the investors have not required detailed financial statements from Hamdan. However, because the quality of the carpets is very good, sales of the carpets have increased rapidly in the recent months and Hamdan is considering a major expansion. His plans include opening another store in Dubai, as well as selling his carpets to other customers in Saudi Arabia.
Hamdan’s expansion plans require a significant investment, which he plans to finance with a combination of additional funds from outsiders plus some money borrowed from banks. The new investors and banks require Hamdan to provide them with more organized and detailed financial statements than he has previously prepared. To do that, Hamdan has hired a financial analyst, her name is Maryam Ahmed (she holds a bachelor’s degree in finance from ADU University). He asked Maryam to evaluate the performance of the company over the past year. After going through all the bank statements, sales receipts, tax returns, and other records, Maryam has assembled the following information:
2018 |
2019 |
|
Cost of goods sold |
$ 224,359 |
$ 283,281 |
Cash |
32,372 |
34,394 |
Depreciation |
63,334 |
71,584 |
Interest expense |
13,783 |
15,780 |
Selling & Administrative |
44,121 |
57,586 |
Accounts payable |
57,220 |
63,479 |
Fixed assets |
279,419 |
348,508 |
Sales |
440,122 |
536,483 |
Accounts receivable |
22,939 |
29,755 |
Notes payable |
26,079 |
28,474 |
Long-term debt |
141,040 |
158,368 |
Inventory |
48,272 |
66,244 |
New equity |
- |
27,157 |
Red Rose currently pays out 50 percent of net income as dividends to Hamdan and other original investors and has a 21 percent tax rate. You are working with Maryam, and she asked you to prepare the followings:
In addition to the previous requirements, she asked the following questions:
NOTE: Submit your answers in Excel Sheet
Get Answers For Free
Most questions answered within 1 hours.