Reference no: EM132173610
Entrepreneurial Finance Assignment -
Task One - Explain how and why business plans of new ventures (i.e. start-ups) differ from the business plans of more established businesses (i.e. mature). Answer should be between 150 to 300 words in length.
Task Two - Sandra has noted that her business texts focused on the preparation of pro-forma statements for established businesses with several years of historical information on which to base their projections. She does not know how to prepare forecasts for a completely new business.
Required: Assume that Sandra has turned to you for advice on how to prepare pro-forma income statements and statements of financial position for her fashion boutique. Describe to Sandra how these statements can be prepared. Appropriate examples may be used to aid your description. Answer should be between 250 to 500 words in length.
Task Three - Researchers at Leeds University, have created a washing machine that uses 90% less water than traditional machines. Xeros the company that will bring this machine to market is a spin-out from the commercial activities of Leeds University. The patented technology cleans clothes with reusable nylon polymer beads. These beans last for about six months before they need to be replaced. Besides being "almost waterless", the machine uses much less detergent as well as 30 % less energy since the need to "tumble dry" is eliminated. The machine is currently undergoing advanced prototyping to prepare for commercial launch.
Required: The management of Xeros has approached you to recommend financial ratios that can be currently used to discern whether the company is maintaining sufficient assets to meet their short term obligations. Explain and justify the recommended ratios. Answer should be between 150 to 300 words in length.
Task Four - Following are two years of income statements and balance sheets for the Munich Exports Corporation.
|
Statement of Financial Position
|
2019
|
2020
|
|
Cash
|
$ 50,000
|
$ 50,000
|
|
Accounts Receivable
|
200,000
|
300,000
|
|
Inventories
|
450,000
|
570,000
|
|
Total Current Assets
|
700,000
|
920,000
|
|
Fixed Assets (Net)
|
300,000
|
380,000
|
|
|
|
|
Total Assets
|
1,000,000
|
1,300,000
|
|
|
|
|
Accounts Payable
|
130,000
|
180,000
|
|
Accruals
|
50,000
|
70,000
|
|
Bank Loan
|
90,000
|
90,000
|
|
Total Current Liabilities
|
270,000
|
340,000
|
|
Long-term loan
|
400,000
|
550,000
|
|
Common Stock & Paid-in Capital
|
250,000
|
250,000
|
|
Retained Earnings
|
80,000
|
160,000
|
|
|
|
|
Total liabilities & equity
|
1,000,000
|
1,300,000
|
|
|
|
|
Income Statement
|
2019
|
2020
|
|
Net Sales
|
1,300,000
|
1,600,000
|
|
Cost of Sales
|
780,000
|
960,000
|
|
Gross Profit
|
520,000
|
640,000
|
|
Marketing
|
130,000
|
160,000
|
|
General & Administrative
|
150,000
|
150,000
|
|
Depreciation
|
40,000
|
55,000
|
|
EBIT
|
200,000
|
275,000
|
|
Interest
|
45,000
|
55,000
|
|
EBT
|
155,000
|
220,000
|
|
Tax (40%)
|
62,000
|
88,000
|
|
Net Income
|
93,000
|
132,000
|
Required:
1. Calculate the cash build, cash burn, and net cash burn or build for Munich Exports in 2020.
2. Assume that 2021 will be a repeat of 2020. If your answer in Part 1 resulted in a net cash burn position, calculate the net cash burn monthly rate and indicate the number of months remaining "until out of cash." If your answer in Part A resulted in a net cash build position, calculate the net cash build monthly rate and indicate the expected cash balance at the end of 2021.
3. Calculate the length of Munich Exports' cash conversion cycle for 2020.