4 see tables below 5 based on the forecasted

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4. See Tables Below
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5. Based on the forecasted financial statements for 2013 and 2014, Golden Egg will be able to invest in marketable securities. Five percent of sales is $22,069 for 2013 and $25,379 for 2014. The amount of cash of excess cash for 2103 is $51,388 and $69,782 for 2014. This excess cash can be invested into marketable securities and it makes sense to invest because of the 7% return it can earn for the company. The financial forecasts reveal that Golden Egg is not paying any cash dividends until the loans are paid off, even though their expected net income is to rise by $10,378 from 2012 to 2013. The shareholders may lose confidence in the company, which will add more pressure to Golden Egg. 6. Currently, Golden Egg owes $56,548 in short-term and long-term bank loans. Based off the amount of liquid assets that Golden Egg has available to them, they would be able to repay the loans by December 31, 2013. This may cause problems for them in the year 2013 but having until 2014 to repay the loans would be a more idea situation. 7. If the bank decides to withdraw the entire line of credit and to demand immediate repayment of the two existing loans (the short-term and long-term loans) extended to Golden Egg, Golden Egg could find a new investor that could pay for the immediate repayment of the loans and the additional $12,750,000 for the expansion, or file chapter 11 bankruptcy and restructure their business so they can get out from underwater, or make repayment of the loans immediately and then sell additional stock of the company to raise new capital. 8. When a company uses different accounting methods for financial statements, it can impact the validity of the comparative ratio analysis. Smaller companies, gross sales less than $25,000,000 in the three years, can opt to use the cash accounting method instead of the accrual accounting method. The cash accounting method accounts for income in the year of receipt. Financial ratios and the industry averages become skewed due to this and makes them less valid. Also, knowing if ratios were calculated before or after adjustments have been made to the financial statements matter. Looking at Golden Egg, the current ratio is 1.79 and the industry average is 2.50. The industry average could have changed due to corporations changing their accounting methods or either Golden Egg or the industry leaders made adjustments to their financial statements before their calculations of the ratios. 9. Now revise your pro forma financial statements for 2013 and 2014 assuming the following conditions: a. When loans are repaid, the repayments will occur at a constant rate throughout the year. Therefore, on average, the amount of short-term loans outstanding will be half of the beginning-of-year amount. 10. I believe that based on the current analysis and pro forma balance sheet and income statement that they have the necessary capital required to take on the additional loan. If they were able to decrease their receivables and increase sales as they have the plans to do so they will have sufficient cash to pay off their debts, thus we do not see it as necessary to recall the loans at this time. If anything changes we do believe
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  • Spring '18
  • Felski
  • Balance Sheet, Financial Ratio, Generally Accepted Accounting Principles, golden egg

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