FINC 5880 HW LR Lawn Treatment
Sheet1 H.W.LR Lawn Treatment, Inc 1) For the case study LR Lawn Treatments, please complete the blank spaces on the LR Lawn Treatment spreadsheet. Please also calculate the following for 2009. Income Statement20082009% Incr/Decr2009 Alt. Total Market (lawns professionally treated)45,00043,00043,000a) Return on Assets: ______ LR Lawns Treated (unit volume)11,00012,000b) Current Ratio: _______ Sales Revenue$ 860,000$ 885,000c) Debt/Equity Ratio: _______ Memo: Market Shared) Cash flow from Operations: _______ Memo: Avg. Revenue/Lawne) Cash flow from Investing Activities: ______ f) Cash Flow from Financing Activities: _______ Less: Variable Cost of Sales Revenueg) Net Change in Cash for the year: _______ Chemicals$ 115,000$ 125,000 1099 Workers *$ 175,000$ 182,0002) In a short essay (5-10 sentences), please compare the change in the financial results of the lawn business from 2008 to 2009. Truck Running Costs$ 40,000$ 40,000In your essay, please provide plausible second tier explanations for the changes. Consider selling prices, volumes, market shares, fixed costs and variable costs. Use your imagination. Total Cost of Sales Revenue$ 330,000$ 347,000For example, an increase in the market share might be due to a strong economy or a new housing development. Essay is worth 6 points and will be subjectively graded. = Gross Profit Margin$ 530,000$ 538,000 Memo: Gross Profit Margin % 3) The owner believes that if she would have had prices that were 5% lower in 2009, added another salaried salesperson (for $45,000) and increased advertising expenses to $60,000, Less: Overhead (Other Operating) Expenses:the unit volume (lawns Treated) would have been 25% higher, and net income would have been higher in 2009. Salaried Employees$ 190,000$ 180,000Please complete the column 4 (2009 alt) income statement and see if she is correct. Use logical business assumptions in making this forecast. Office and Warehouse rent$ 90,000$ 90,000Please also calculate the following based upon these new assumptions: Depreciation of Trucks$ 30,000$ 40,000 Advertising$ 30,000$ 40,000a) Market share: _________ Total Overhead Expenses$ 340,000$ 350,000b) Gross Margin %: ______ c) Profit Margin %: _______ = EBIT (net operating income)$ 190,000$ 188,000 less: Interest Expense $ 23,000$ 35,00035,000 = Pretax Income (profit)$ 167,000$ 153,000 less: Income taxes$ 40,000$ 35,000 = Net Income (profit)$ 127,000$ 118,000 Memo: Profit Margin % Balance Sheet Cash$ 5,000$ 5,000 Accounts Receivable$ 25,000$ 40,000 Inventories$ 8,000$ 9,000 = Current Assets$ 38,000$ 54,000 Fixed Assets$ 500,000$ 550,000 - Accumulated Depreciation$ 80,000$ 120,000 = Net Fixed Assets$ 420,000$ 430,000 Total Assets$ 458,000$ 484,000 Accounts Payable$ 8,000$ 20,000 Bank Loans$ 275,000$ 300,000 = Total Liabilities$ 283,000$ 320,000 Common Stock (Invested capital)$ 100,000$ 100,000 Retained Earnings$ 75,000$ 64,000 Total Liabilities and Owner's Equity$ 458,000$ 484,000 * Workers are paid based upon the number of lawns treated (not hourly). Sheet2 Sheet3 H.W. Emily runs a vineyard that produces wine that has a recommended retail sales price of $9.00. Her selling price to the retailer is $6.50/bottle and her variable costs of goods sold are $3.10/bottle. She has operating costs (overhead) of $140,000 per month and she sells, on average, 60,000 bottles per month. Calculate for an average month: please show your calculations. a) Retail margin %: ______ b) Emily’s Gross margin %: _______ c) Breakeven point: __________ d) Operating Income: _______ e) Operating Income: _______ (if sales volume increases by 10%) f) Operating Income: _______ (if selling price is increases by 10%)