Assignment: Finance And Accounting Senior Accountant 132432

Question

Assignm E Ntfinance And Accountingsenior Accountant Analysis Assignm E Ntfinance And Accountingsenior Accountant Analysis1du E Date Assignm E Ntfinance And Accountingsenior Accountant Analysis1du E Date ASSIGNM E NT Finance and Accounting Senior Accountant Analysis 1 DU E DATE Week 5 S T R AY E R U N I V E RS I T Y | CO PY R I G H TS R E S E RV E D. SHAUN’S CRITERIA Hi Team, I wanted to provide you some guidelines as you determine how we’ll finance our expansion. Please give this careful consideration, as we need to get this right. 1. I estimate we’ll need $150,000 to increase capacity in order to stock the five additional pop-up stands 2. We’ll need to make sure we have additional funds available to increase our marketing efforts to stimulate demand 3. I’d like to maintain or increase our profit margins 4. If we’re successful over the next two years, we’ll likely seek additional capital to expand into more stores, so I’d like to do all we can now to enhance our credibility We need to move on this quickly, so I’d like an answer by the end of the week. -Shaun Financing Options Option 1: Equity Raise $150,000 from a venture capital firm in exchange for 30% of the company Option 2: Debt Secure a loan of $150,000 at a 10% annual interest rate, to be repaid over 7 years Option 3: Debt + Self-Financing Secure a loan of $100,000 at a 7% annual interest rate, to be repaid over 7 years, and self-finance the remaining $50,000 Junior Accountant Email Hi, I’m working on expenses from the last quarter for the revised income statement, but I’m unsure of what to do next. I grouped similar transactions to compile the following list: How would you like me to proceed given where we are in the process? Thanks in advance for your guidance. Best, Jenna automotive maintenance cost travel expenses training and development costs office rent raw material purchases inventory purchases marketing expenses payroll expenses interest expenses technology purchases office supplies expenses Sunstruc

Dr. Jack HW Helper · Accepted Answer

As a Senior Accountant for SunsTruck Sunglasses, the primary responsibility involves analyzing financial data to guide strategic decision-making, especially concerning expansion financing, preparing accurate financial statements, and evaluating investment viability. This analysis explores the most suitable financing options for SunsTruck’s growth plans, detailing the rationale behind the decision, and examining the importance of accurate financial statement preparation and analysis. Analysis of Financing Options Shaun, the owner of SunsTruck, has outlined a need for $150,000 to support capacity expansion into five new pop-up stands, alongside increasing marketing efforts to stimulate demand while maintaining or improving profit margins. Given the options—equity, debt, and a hybrid of debt and self-financing—the decision hinges on multiple factors such as cost of capital, ownership dilution, and financial stability. Option 1: Equity Financing involves raising $150,000 from venture capital in exchange for a 30% stake. This option dilutes ownership but provides significant capital without immediate repayment obligations. It could bolster credibility and investor confidence, especially if the company prioritizes preserving cash flow for operational needs. However, giving up 30% equity could impact control and future profits. Option 2: Debt Financing, through a loan at 10% annual interest over seven years, offers a fixed repayment schedule with no ownership dilution. The cost of debt, in this case, could be attractive if SunsTruck maintains healthy cash flows. The risk involves potential strain on cash flow if revenues do not meet forecasts, but it preserves ownership control. Option 3: A hybrid approach combines a $100,000 loan at 7% interest and self-financing $50,000 of the expansion. This method reduces borrowing costs and limits debt but still maintains some level of owner investment. It may be optimal for maintaining financial flexibility, especially if the company

Revenues	Amount
Sales revenues	$778,590
Other revenue	$11,000
Total revenue	$789,590

Expenses	Amount
Selling, general and administrative expenses	($78,959)
Marketing and advertising expenses	($55,271)
Total expenses	($153,050)

Assets	Amount
Current assets	Cash: $145,500
	Accounts receivable: $468,000
	Merchandise inventories: $613,500
Total current assets	$1,227,000
Long-term assets	Property, truck and equipment: $37,500
Total assets	$1,264,500

Liabilities	Amount
Current liabilities	Accounts Payable: $55,220
	Operating loan: $42,000
Total current liabilities	$97,220
Long-term liabilities	Truck loan: $28,000
	B+M loan: $360,000
Total long-term liabilities	$388,000
Total liabilities	$485,220

Assignment: Finance And Accounting Senior Accountant 132432

Assignm E Ntfinance And Accountingsenior Accountant Analysis

Financing Options

Junior Accountant Email

Sunstruck Sunglasses Income Statement

Sunstruck Sunglasses Balance Sheet

Sunstruck Sunglasses Statement of Cash Flows

Additional Notes

Paper For Above instruction

Analysis of Financing Options

Recommended Financing Choice

Next Steps in the Accounting Cycle

Choosing the Correct Financial Statement

Investment Evaluation

Conclusion

References

Cash Flows from Operating Activities
Cash collected from customers: $733,780
Cash paid to suppliers and employees: ($529,580)
Cash paid for interest: ($20,000)
Cash paid for taxes: ($55,060)
Net cash provided by operating activities: $102,255