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Your third challenge is to advise Kaj on what has been happening to Scandi relative to financial developments in the home furnishings industry.
G. Kaj has been able to obtain some industry ratio data from the home furnishings industry trade association to which he belongs. The industry association collects proprietary financial information from members of the association, compiles averages to protect the proprietary nature of the information, and provides averages for use by individual trade association members. Trade association data for the home furnishings industry show an average net profit margin of 6.5 percent, a salesto-assets ratio of 1.3 times, and a total-debt-to-total-assets ratio of 55 percent over the 2014 – 2015 and 2015 – 2016 periods. Compare and contrast Scandi ’ s results with the industry average in terms of the
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- MINICASE Scandi Home Furnishings, Inc. Kaj Rasmussen founded Scandi Home Furnishings as a corporation during mid-2010. Sales during the first full year (2011) of operation reached $1.3 million. Sales increased by 15 percent in 2012 and another 20 percent in 2013. However, after increasing in 2012 over 2011, profits fell sharply in 2013, causing Kaj to wonder what was happening to his "pride-and- joy" business venture. After all, Kaj worked as closely as possible to a 24/7 pace, beginning with the startup of Scandi and continuing through the first three full years of operation. Scandi Home Furnishings, located in eastern North Carolina, designs, manufactures, and sells Scandinavian-designed furniture and accessories to home furnishings retailers. The modern Scandinavian design has a streamlined and unclut- tered look. While this furniture style is primarily associated with Denmark, both Norwegian and Swedish designers have contributed to the allure of Scandinavian home furnishings. Some…Spyker is a small Nethwelands-based designer and manufacturer of exclusive sports cars, which had its initial public offering in 2004 but delisted from the Amsterdam Stock Exchange in 2013. During the first five years as a publicly listed company, Spyker's annual revenues went down from a maximum of $19.7 million (in 2006) to $6.6 million (in 2009). In these years, Spyker produced 242 new cars (including demonstration cars) and sold 194 cars. At the end of 2009. It held 28 cars in stock. Further, in 2009, the company spent close to $9.8 million on development, which it added to its development asset of $27.3 million, and $14,000 on research. Because Spyker had been loss-making since its IPO, the car manufacturer had $97 million in tax- deductible carry forward losses the end of 2009. Required a. Identify the key accounting policies for this company. b. What are this company’s primary areas of accounting flexibility? (Focus on the key accounting policies.)On March 3, 2016, Zad Company was established to produce and sell plastic products. The company produces a full line of plastic products included customized orders. The Chief Executive Officer of the company is working hard to enhance profitability and liquidity. Recently, you have been hired as the Financial Director of the company. 1. On March 8, 2020, the Chief Financial Officer stated to you that she wishes to reduce the company's investment in current assets since those assets provide little, if any, return to the firm. How would you respond to this statement? 2. On September 17, 2020, the Chief Financial Officer stated to you that as long as the company maintains a positive cash balance, why is it essential to review the firm's cash flows? 3. On January 5, 2021, the Chief Financial Officer wishes to expand the company's operations and are trying to determine the amount of debt financing the company should obtain versus the amount of equity financing that should be raised. The…
- Salinger Software was founded in 2012. The company lost money each of its first three years, but was able to turn a profit in 2015. Salinger's operating income (EBIT) for its first four years of operations is reported below. Year EBIT 2012 -$50,000,000 2013 -$150,000,000 2014 -$100,000,000 2015 $700,000,000 The company has no debt, so operating income equals earnings before taxes. The corporate tax rate has remained constant at 35%. Assume that the company took full advantage of the carry-back, carry-forward provisions in the Tax Code, and assume that the current provisions were applicable in 2012. How much tax did the company pay in 2015? Select one: a. $147,000,000 b. $165,200,000 c. $158,200,000 d. $140,000,000 e. $107,800,000Lou Reed is the primary accountant and 1 of 87 employees at The Velvet Underground, a company that manufactures professional grade recording equipment and mixing boards. By the end of their third year, 2017, TVU had already turned a $150,000 profit. At that time, Lou used analytics to estimate promising sales of a new device TVU planned to sell. Unfortunately, the new device did not live up to expected potential. At the end of the following year, 2018, Lou was tasked with using analytics to figure out why the device did not sell well, and how those sales might be improved. Fortunately, in 2019, sales of the device increased, along with all of the company's other products. Each time Lou utilized analytics, he had to access a number of different databases to find all the data he needed. Velvet Underground's sales revenue grew from $250,000 in 2018 to $1 million in 2019, prompting Lou to upgrade his QuickBooks software. Which of the following options best describes TVU's accounting…Lou Reed is the primary accountant and 1 of 87 employees at The Velvet Underground, a company that manufactures professional grade recording equipment and mixing boards. By the end of their third year, 2017, TVU had already turned a $150,000 profit. At that time, Lou used analytics to estimate promising sales of a new device TVU planned to sell. Unfortunately, the new device did not live up to expected potential. At the end of the following year, 2018, Lou was tasked with using analytics to figure out why the device did not sell well, and how those sales might be improved. Fortunately, in 2019, sales of the device increased, along with all of the company’s other products. Each time Lou utilized analytics, he had to access a number of different databases to find all the data he needed. Velvet Underground’s sales revenue grew from $250,000 in 2018 to $1 million in 2019, prompting Lou to upgrade his QuickBooks software. Which of the following options best describes TVU's integrated…
- Bradbury Ltd is a family-owned clothes manufacturer. For a number of years, the chair and managing director was David Bradbury. During his period of office, sales revenue had grown steadily at a rate of 2 to 3 per cent each year. David Bradbury retired on 30 November 2017 and was succeeded by his son Simon. Soon after taking office, Simon decided to expand the business. Within weeks he had successfully negotiated a five-year contract with a large clothes retailer to make a range of sports and leisurewear items. The contract will result in an additional £2 million in sales revenue during each year of the contract. To fulfil the contract, Bradbury Ltd acquired new equipment and premises. See Images Dividends of £120,000 were paid on ordinary shares in respect of each of the two years. Required: (a) Calculate, for each year (using year-end figures for statement of financial position items), the following ratios: 1.operating profifit margin 2.return on capital employed 3.current ratio…Nobility Homes, Incorporated, is a small maker of manufactured homes sold throughout the state of Florida. The following are selected financial data for the company for the period 2012-2016. Year 2012 2013 2014 2015 2016 2012 % 2013 0.4 100.0 0.44 1.09 17.4 Profit margin (8) Retention ratio (8) Asset turnover (X) Financial leverage (X) Growth rate in sales (t) Source: Data from Nobility Homes 2012 to 2016 annual reports a. Calculate Nobility Homes' annual sustainable growth rate for the years 2012 through 2016. Note: Round your answers to 1 decimal place. Sustainable Growth Rate % % % 6.7 % 2014 5.0 100.0 0.49 1.13 16.9 2015 5.4 100.0 0.54 1.16 14.4 9.4 100.0 0.59 2016 1.21 30.9 17.4 100.0 0.64 1.29 22.4Penco Ltd’s board of directors are looking into expanding the company’s business operations. Before investing in a new product, the board conducted one focus group, and based on this one bit of feedback, invested $5m of company funds to develop the product. Within two years, the company had lost $8m due to poor sales. Shareholders are furious and wish to hold directors personally liable for this loss. Analyse the likely outcome for directors if shareholders were to accuse the board of breaching CA s 180.
- [The following information applies to the questions displayed below.] CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below: Sales $ 4,980,000 Net operating income $ 298,800 Average operating assets $ 830,000 The following questions are to be considered independently. 2. The entrepreneur who founded the company is convinced that sales will increase next year by 60% and that net operating income will increase by 160%, with no increase in average operating assets. What would be the company’s ROI? Return on investment (ROI) %In 2002, Mr. Rollerball started Mighty Mouse, Inc., a small, 75-employee firm that produces and sells wireless keyboards and other devices to vendors through its manufacturing plant in Little Rock, Arkansas. In its first 2 years of business, MM saw a substantial growth in sales and at current capacity was unable to keep up with demand. To compete, MM enlarged its manufacturing facilities. The new facility increased to 250 employees. During this period of expansion, MM has paid little attention to internal control procedures.Security Recently, systems problems and hardware failures have caused the operating system to crash. Mr. Rollerball was extremely concerned to discover that confidential company information had been printed out on the printers as a result of these crashes. Also, important digital documents were erased from storage media. Malicious programs such as viruses, worms, and Trojan horses have plagued the company and caused significant data corruption. MM has devoted…For many years, Janice Virtue had been a professor of Business Ethics in the Faculty of Business at a major Canadian university. In 2018, while continuing to teach one section of Business Ethics, she established Virtue Ltd. (VL) in order to market her numerous publications and online courses involving the application of ethical principles to business situations. While the company experienced a net operating loss of $128,000 in the fiscal period ending December 31, 2018, VL experienced rapidly increasing sales during 2019. Because Janice believed the improvement was indicative of the success to come, VL moved to larger premises that were purchased for $423,000. Of this total, $100,000 related to the land, with the remaining $323,000 allocated to the building. Because the building was to be used exclusively for non-residential purposes, it was allocated to a separate Class 1. In selling the previous premises in 2019, VL experienced an allowable capital loss on the land of $36,000. The…