Cash Flow Statement for Clark’s Sporting Goods
Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages Description/Paper Instructions
Cash Flow Statement for Clark’s Sporting Goods
You will prepare a Cash Flow Statement for Clark’s Sporting Goods and then you will calculate ratios for Sam’s Paint and Drywall.
Case 1: Clark’s Sporting Goods
Dave Clark plans to open a sporting goods store in London, Ontario as soon as he graduates from university in the spring. He did a market-demand analysis for such a store for one of his course projects and is confident the opportunity exists.
Dave’s major problem is determining the amount of funds he will require. His father, who is quite wealthy, will give him $30,000 as a graduation gift to invest. He has located a store that rents for $2,000 per month (in advance) and has made an itemized list of the start-up costs as follows:
Merchandise (4 months) $100,000 Shelves, racks, displays 5,000 Remodeling 4,000 Cash register (used) 800 Check-out counter 500 Office supplies (4 months’ supply) 200 Telephone: $50/month, $100 deposit, $25 installation fee Utilities: $200/month, $200 deposit Dave has made the following estimates:
He can completely turn over his inventory (sell everything) every four months
In the first year, he plans a 60 percent markup on the cost of merchandise
He can get by on a salary of $2000 per month
He plans to hire one full-time employee at $1500 per month and one at $1000
He plans to spend $2000 in opening promotion in the first month and $500 per month after the grand opening for advertising
He estimates that 50 percent of his sales will be on credit and will be paid in 30 days
The interest rate is 10 percent, payable every four months
The depreciation rate is 10 percent
Estimate how much money Dave will need from outside sources to start his business. Here are the steps:
Calculate start-up costs
Start-up Costs Merchandise xxxx nnnn xxxx nnnn xxxx nnnn xxxx And so on… And so on… TOTAL START-UP COSTS Subtract what Dave already has from the amount needed (round up to the nearest $1,000) to get the amount he will need to finance.
Assuming Dave receives start-up financing from a bank, as calculated in question 1, will he require an operating line of credit during the first four months of operation? If so, how much? Prepare a Cash Flow Statement for the first four months, using the template given.
Month 1 Month 2 Month 3 Month 4 Sales Revenue * xxxx Collection of A/R ——- Total xxxx Cash Expenses Merchandise (in 4th month) xxxx Owner salary xxxx Clerk salary xxxx Advertising xxxx Utilities xxxx Phone xxxx Rent xxxx Interest** ——- ——- ——- Total xxxxx Cash Flow for the month XXXX Cumulative cash flow XXXX *Sales Revenue
Start with the cost of merchandise sold in 4 months
Figure out the revenues (.6 x cost of merchandise)
Divide the 4-month sales figures by 4 to get the monthly sales figures
Divide the monthly sales figure by ½ to yield the cash sales amount
Remember that in the next period (month 2), Dave will receive the other half of the revenue (the part that was in credit is the Accounts Receivable).
*Interest
Start with the amount Dave needed to borrow
Multiply by the annual interest rate
Divide by 12 to get the monthly interest and then calculate the amount needed to be paid every 4 months.
Should Dave pursue debt or equity sources of funds to get started?
RUBRIC
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. 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