CHEMALITE, INC (B) Executive Summary: Bennett Alexander, a chemical engineer founded Chemalite, Inc. in late 1990. The company was set up to manufacture and sell the Chemalite.
The projected financial statements for the year 1992 were made to study the performance of the company in March 1991. The balance sheet and income statement of current year and projected year were provided. |December 31, 1991 (Actual) |December 31, 1992 | | | |(Pro-forma) | |Cash |$113,000 |$9,490 | |Total Assets |$539,375 |$1,783,150 | |Total Liabilities and Owners Equity |$539,375 |$1,783,150 | |Net Income |$28,475 |$113,995 | Below is the Cash Flow table for the projected year i. e. , 1992. The main sources of cash: |Cash Collections |$1,816,220 | |Sold Existing Equipments |$215,500 | |Long Term Debt |$510,000 | |Short Term Debt |$200,000 | Main uses of cash: |C a s h p a y m e n t s ( p u rc h a s e s a n d O P E X) | | M a t e ri a l s |( $4,73,150) | | Lab o r |( $6,60,000) | | I n v e n t o ry | ( $99,680) | | Rent | ( $25,000) | | Utilitie s | ( $82,000) | | A d v e rt i s i n g | ( $70,000) | | R &D | ( $63,250) | | I n s u ra n c e | ( $97,500) | | S a l a ri e s |( $1,95,750) | |I n t e re s t | ( $58,750) | |Tax e s P aid | ( $39,150) | |P u rc h a s e o f h a rd a s s e t s ( m a c h i n e ry ) |( $9,45,000) | |S to ck b u y b ack | ( $26,000) | |D iv id e n ts P aid | ( $10,000) | Recommendations: Total cash in hand as suggested by the cash flow statements have gone down.
This is mainly because of high accounts receivables. Thus, Bennett should try to ensure that the cash is received in the same financial year.