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Cash Flows and Financial Statements at Sunset Boards, Inc

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Cash Flows and Financial Statements at Sunset Boards, Inc. Sunset Boards is a small company that manufactures and sells Sunset Boards currently pays out 50 percent of net surfboards in Malibu. Tad Marks, the founder of the company, income as dividends to Tad and the other original investors, is in charge of the design and sale of the surfboards, but his and has a 20 percent tax rate. You are Christina's assistant, and background is in surfing, not business. As a result, the compa she has asked you to prepare the following: ny's financial records are not well maintained. The initial investment in Sunset Boards was provided by 1. An income statement for 2008 and 2009. Tad and his friends and family. Because the initial investment 2. A balance sheet for 2008 and 2009. was relatively small, and the company has made surfboards 3. Operating cash flow for each year. only for its own store, the investors haven't required detailed 4. Cash flow from assets for 2009, financial statements from Tad. But thanks to word of mouth among professional surfers, sales have picked up recently, and 5. Cash flow to creditors for 2009. Tad is considering a major expansion. His plans include open 6. Cash flow to stockholders for 2009. ing another surfboard store in Hawaii, as well as supplying his "sticks" (surfer lingo for boards) to other sellers. QUESTIONS Tad's expansion plans require a significant investment, which he plans to finance with a combination of additional 1. How would you describe Sunset Boards' cash flows for funds from outsiders plus some money borrowed from banks. 2009? Write a brief discussion. Naturally, the new investors and creditors require more orga 2. In light of your discussion in the previous question, nized and detailed financial statements than Tad has previ what do you think about Tad's expansion plans? ously prepared. At the urging of his investors. Tad has hired financial analyst Christina Wolfe to evaluate the performance of the company over the past year. After rooting through old bank statements, sales receipts, tax returns, and other records, Christina has assembled the fol- lowing information: Cost of goods sold Cash Depreciation Interest expense Selling and administrative Accounts payable Net fixed assets Sales Accounts receivable Notes payable Long-term debt Inventory New equity 2008 $126,038 18,187 35,581 7,735 24,787 32, 143 156,975 247,259 12,887 14,651 79,235 27.119 0 2009 $159,143 27.478 40,217 8,866 32,352 36,404 191,250 301,392 16,717 15,997 91.195 37,216 15,600.