El Cap Climbing Company
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El Cap Climbing Company (ECCC) is a small startup that manufactures and sells high-quality climbing gear in Fresno, California. The founder of the company, Leah, has been incredibly successful, but she hasn't kept the company's financial records as well as she might have. The initial investment for El Cap was provided by her friends and family and was small. However, current operations can't meet the demand for the product, and Leah has plans to increase both production and the number of storefronts. These plans require a large investment from both equity and debt financing. The new investors and creditors require detailed financial statements. Leah has hired you, a financial analyst, to prepare these statements and give insight into the financial position of the firm. Leah has provided information from her bank statements, bills, and receipts in an Excel spreadsheet. She explained to you that taxes are paid at a rate of 30 percent, and dividends are paid at a rate of 40 percent. (Note: You can create the statements in the same Excel spreadsheet that has the financial information.)
Prepare the following:
An income statement for 2018 and 2019
A balance sheet for 2018 and 2019
Operating cash flows for the two years
Cash flows from assets in 2019
Cash flows to creditors for 2019
Cash flows to stockholders for 2019
B. Answer the following:
1. How would you describe the financial position of the firm in 2019? Write a brief overview.
2. What do you think about Leah's plans to expand?
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Solution Summary
El Cap Climbing Company (ECCC) is a small startup that manufactures and sells high-quality climbing gear in Fresno, California. Prepare income statement, balance sheet and various cash flows.
Solution Preview
Answer 1: The financial position of ECCC has improved significantly in 2019 compared to the performance in 2018. Below are some of the key highlights that describes the strength of the firm in 2019:
Sales in 2019 has increased by more than 20% in the current year compared to previous year. The sales growth implies that there is lot of demand in the product and services offered by the firm.
The net ...
Education
- Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
- Bachelor of Commerce, West Bengal University
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