prepare the financial statements, comparative analysis and benchmarking to sector performance|Business Finance – Accounting
Unit: Financial Statements: A Review
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Respond to the following scenario with your thoughts, ideas, and comments. Be substantive and clear, and use research to reinforce your ideas.
Mary Francis comes into your office later in the morning.
“Good news! I think we’ve got strong potential investors!” Mary announces.
“That’s great!” you reply.
“And now, they are requesting for financial information” Mary states.
“sure , I could provide a 50-page analysis for them!” you say.
“That’s exactly what they don’t want. I’m beginning to notice that some of the investors don’t have a strong finance background, and the last thing we want to do is scare them off with too many financial figures” Mary explains. I would like for you to complete a presentation. However, I want you to keep it simple and clear. Using all 3 Financial Statements, please provide an analysis on Apix’s assets, liabilities, cash, and profit. As well, choose 2 additional components on each of the sheets, and provide your initial impression on the company financial situation. Do you think you could handle this?”
“Of course! I’ll get started on this right away.”
Mary also indicates that she would like between 10–15 slides with 150–200 words in the notes page.
Scenario:
Apix Printing, Inc.
Apix Printing, Inc. is a private, domestic United States printer of periodicals, newspaper inserts, and advertising materials that accompany distributions of Sunday and weekday circulations of large metropolitan newspapers. The company, headed by chief executive officer (CEO) John Matthews, generates $450 million in revenues from three product lines (periodicals, inserts, and advertising) and has long-term contracts with several large U.S. retailers to produce weekly sales flyer inserts as well as metropolitan newspapers to produce Sunday magazine inserts and coupons. Its printing presses are characterized by offset print technology and are capable of high-capacity output; in addition, the company recently migrated to water-soluble inks, which considerably reduces manufacturing emissions.
The firm`s executive team, employees, and above all, its vice president (VP) of Production, Luke Stewart, are committed to environmentally-sustainable manufacturing practices. Presently, the only substrate Apix uses is paper, specifically newsprint of various weights. Trim and waste are recycled in accordance with the company’s sustainability commitment. Manufacturing divisions are geographically aligned with customers’ locations to minimize logistics costs and response time to customer requirements; however, a centralized corporate entity administers functions such as human resources, information technology, and financial reporting. The VP of sales and administration, James Simeon, oversees administration and quality compliance among the various divisions. There are presently five manufacturing divisions: Northwest, Southwest, Northeast, Southeast, and Midwest.
As at now, Apix is only marginally profitable, and as such, the chief financial officer (CFO), Mary Francis, has indicated that external financing will be required to support a company expansion into a new segment of the printing sector: food packaging. This endeavor will require new investments in equipment as well as substrate inventory; promotional costs will also increase. In addition, Timothy Russell, the new Audit Committee Chair, has pointed out that the company’s compliance with the requirements of the Sarbanes-Oxley Act (SOX) will also cause administrative costs to increase. Following the requirements is paramount to successfully file a registration statement and to issue equity to shareholders in an initial public offering (IPO).
As the newly hired VP of finance, you report to the CFO. In this capacity, your responsibilities include preparation of financial statements, comparative analysis and benchmarking to sector performance, and the assessment of new business investment opportunities to grow Apix’s expansion endeavors in a challenging market.
You are required to work with a minimum of 3 sources for this assignment.
Apex Printing Balance Sheets As of December 31, 2013 and 2012
000$ 000$
Assets 2013 2012 Cash 6,000 5,700 Accounts Receivable 2,350 2,300 Inventory 12,100 6,500 Total Current Assets 20,450 14,500
Land 25,000 20,000 Building & Equipment 300,000 300,000 Less: Accumulated Depreciation – Building & Equipment (187,850) (160,000) Total Long Term Assets 137,150 160,000 Total Assets 157,600 174,500
Liabilities and Stockholders’ Equity
Accounts Payable 4,600 3,500 Salaries Payable 0 2,100 Interest Payable 1,500 0 Short Term Notes Payable 12,000 0 Taxes Payable 0 5,600 Total Current Liabilities 18,100 11,200
Mortgate Payable 54,950 100,000 Total Long Term Liabilities 54,950 100,000
Common Stock 60,000 60,000 Retained Earnings 24,550 3,300 Total Stockholders’ Equity 84,550 63,300 Total Liabilities and Stockholders’ Equity 157,600 174,500
Apex Printing Income Statements
For the Periods Ended December 31, 2013 and 2012 000$ 000$
2013 2012
Revenue: 450,000 475,000
Less: Cost of Goods Sold (324,300) (374,500)
Less: Depreciation Expense (27,850) (26,000)
Gross Margin 97,850 74,500
Selling, General & Administrative Expenses (29,100) (32,000)
Income Before Interest & Taxes 68,750 42,500
Interest Expense (7,500) (6,000)
Income Before Taxes 61,250 36,500
Income Taxes (35,000) (30,000)
Net Income 26,250 6,500
Apex Printing
Statement of Cash Flows
For the Period Ended December 31, 2013
000$
Cash Flows from Operating Activities: Net Income 26,250
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation Expense 27,850 Increase in accounts receivable (50) Increase in inventory (5,600) Decrease in salaries payable (2,100) Increase in interest payable 1,500 Decrease in taxes payable (5,600) Increase in Short Term notes Payable 12,000 Increase in accounts payable 1,100 Net Cash Flow from Operating Activities
55,350
Cash Flows from Investing Activities: Cash paid to purchase land (5,000)
Net Cash Flow from Investing Activities
(5,000)
Cash Flows From Financing Activities:
Cash paid for mortgage (45,050) Cash paid for dividends (5,000) Net Cash Flow from Financing Activities
(50,050)
Net Increase in Cash
300
Plus: Cash Balance at December 31, 2012
5,700
Cash Balance at December 31, 2013
6,000
