Answer To: Project - Phase 1 - To Do FNCE 390 - Project - Phase 1 GREENGO LTD. Formation of Business...
Rochak answered on Feb 15 2022
GREENGO with the incorporation and forming a larger entity will make the company very competitive in the industry, the benefits of incorporating into a larger entity are as follows:
· Revenue base increase, as a result, the company can achieve economies of scale
· Customers are acquired through the acquisition of companies will ultimately help in increasing the sale of the company, and will result in a profit
· The incorporation will help increase the days to payable ratio, which will help the company reduce the cash conversion cycle.
Areas of Financial Improvement:
· Improving the day’s receivable ratio, the company has a very high day’s receivable ratio of 66 days which is making the cash conversion cycle to be high
· EBIT/Revenue is something which needs to be improved as it is just 8.24% when the gross profit margin is 29%
· Increase the EBIT/Interest, which is already good but improving this will mean that the company increases the EBIT and decreases the interest
Conflicts that could arise between management and venture capital are:
· Conflicts with the position at the senior management
· Strategy which the management is looking to use whereas the strategy which you want to use
· Business income usage conflicts between the senior management and your firm
Senior Management Position which are most important:
1. Chief Financial Officer
2. Chief Executive Officer
3. Executive Director
4. Chief Information Officer
5. Chief Marketing Officer
No, dividends should not be considered at this time because the firm is just starting out and with the business opportunity, we can look to reinvest the money instead of distributing them as dividends
Appendix
GREENGO LTD.
Owner: Mary Oilseed
Partners: Helen Lamb (75%) + Heather Legg (25%)
Shareholder: Nicolas Gold
Balance Sheet Opening
As Is = Combined + Corporate Tax Effect
Operational Changes Including Corporate Tax
Forecast Results
Start-up Balance Sheets
Canola Grow (proprietorship)
Sugar Sap (partnership)
BannerCrop Inc.
Combined
Revaluation
GREENGO LTD.
First Year Feb 1 2022 - Jan 31 2023
Adjustments
GREENGO LTD.
January 31 2022
February 1
February 1
2022
2022
2021
As Is
Adjustments
Opening
Operations
2022-2023
Jan 31 2023
Assets
Current assets
Cash
$ 65,000
$ 75,000
$ 35,000
$ 1,75,000
$ -
$ 1,75,000
$ 15,07,500.40
7,20,782.40
$ 24,03,283
Accounts receivable
13,75,000
12,00,000
10,80,000
36,55,000
39,10,850
75,65,850
46,20,000
1,21,85,850
Inventory
11,15,000
13,50,000
9,00,000
33,65,000
31,67,150
65,32,150
41,54,920
1,06,87,070
Prepaid expenses
55,000
1,05,000
60,000
2,20,000
35,000
2,55,000
2,55,000
26,10,000
27,30,000
20,75,000
74,15,000
71,13,000
1,45,28,000
15,07,500
94,95,702
2,55,31,203
Property, plant and equipment
Land
6,10,000
5,00,000
5,25,000
16,35,000
20,10,000
36,45,000
36,45,000
Buildings
2,50,000
7,00,000
6,00,000
15,50,000
24,50,000
40,00,000
40,00,000
Equipment
1,60,000
5,50,000
1,30,000
8,40,000
9,75,000
18,15,000
1,54,000
19,69,000
Vehicles
80,000
2,00,000
90,000
3,70,000
3,80,000
7,50,000
7,50,000
11,00,000
19,50,000
13,45,000
43,95,000
58,15,000
1,02,10,000
-
1,54,000
1,03,64,000
Less: Accumulated amortization
Accumulated amortization - Buildings
-
(1,50,000)
(2,00,000)
(3,50,000)
-
(3,50,000)
(1,55,369)
(2,65,042)
(7,70,411)
Accumulated amortization - Equipment
(40,000)
(85,000)
(80,000)
(2,05,000)
-
(2,05,000)
(70,499)
(1,20,263)
(3,95,762)
Accumulated amortization - Vehicles
(80,000)
(1,00,000)
(80,000)
(2,60,000)
-
(2,60,000)
(29,132)
(49,696)
(3,38,828)
(1,20,000)
(3,35,000)
(3,60,000)
(8,15,000)
-
(8,15,000)
(2,55,000)
(4,35,000)
(15,05,001)
9,80,000
16,15,000
9,85,000
35,80,000
58,15,000
93,95,000
(2,55,000)
(2,81,000)
88,58,999
Goodwill and other intangibles
-
-
-
-
3,30,000
3,30,000
3,30,000
$ 35,90,000
$ 43,45,000
$ 30,60,000
$ 1,09,95,000
$ 1,32,58,000
$ 2,42,53,000
$ 12,52,500
$ 92,14,702
$ 3,47,20,202
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable
$ 20,90,000
$ 15,15,000
$ 19,09,900
$ 55,14,900
$ 57,94,900
$ 1,13,09,800
$ 52,48,320
$ 1,65,58,120
Deferred revenue
1,25,000
1,30,000
2,10,000
4,65,000
3,72,000
8,37,000
8,37,000
Income taxes payable
-
-
-
-
-
-
2,25,450
6,86,229
9,11,679
Venture short term loan - due on demand
-
-
-
-
34,01,000
34,01,000
34,01,000
Current portion of long term debt
1,00,000
45,000
50,000
1,95,000
-
1,95,000
1,95,000
23,15,000
16,90,000
21,69,900
61,74,900
95,67,900
1,57,42,800
2,25,450
59,34,549
2,19,02,799
-
Term loan payable
4,00,000
4,00,000
-
8,00,000
8,00,000
16,00,000
1,54,000
17,54,000
Refinance term loan
-
-
-
-
-
-
-
Mortgage payable
-
6,50,000
5,00,000
11,50,000
11,50,000
23,00,000
23,00,000
Due to Relatives
3,00,000
...