Question

Generate Cash Flow Statement for Wicked Good Cupcakes (WGC)

Overview:

In this assignment, you will be creating a cash flow statement based on the Wicked Good Cupcakes income statement and balance sheet.

Instructions:

Using the provided Income Statement and Balance Sheet, generate a Cash Flow Statement. You may have to make some assumptions in the process; list them in a comment column of your Cash Flow Statement. You will then write a narrative, summarize your findings and observations.

Consider the following as you develop the statement and summary:  

1. What can you say about their profit vs cash situation?  

2. Are they in danger of running out of cash?

3. What does their, as Warren Buffet refer, ‘owning earnings’ (free cash flow) look like?

Requirements: .

• Create a cash flow statement and include assumptions in the comments

• Length: two to three-page narrative of your findings and observations

• All questions posed must be addressed completely.

• All sources used must be properly cited in APA format.

	Wicked Good Cupcakes
	Income Statement
	in $ 100
		Full Year		Full Year
		Ended 12/31/2015		Ended 12/31/2016
	Units Sold	87918		114641
	Sales	$12,650		$15,813
	Cost of Goods Sold
	Labor	$2,210		$2,763
	Materials	$2,045		$2,556
	Overhead	$5,685		$7,106
	Delivery	$305		$381
	Total CoGS	$10,245		$12,806
	Gross Margin	$2,405		$3,006
	Expense
	Selling Expense	$875		$1,094
	General & Admin	$585		$731
	Total Expenses	$1,460		$1,825
	Operating profit (EIBT)	$945		$1,181
	Interest	$190		$238
	Profit before Taxes	$755		$944
	Income Taxes	$272		$340
	Net Income	$483		$604
	Dividends	$100		$125
	Retained Earnings	$383		$479
	Depreciation	$575		$719
	Net cash after divends	$958		$1,198
	Add back tax-adjusted interest	$122		$153
	Add back divends	$100		$125
	Cash flow from operations	$1,180		$1,475

			Wicked Good Cupcakes
			Balance Sheet
			Full Year		Full Year
	Assets		Ended 12/31/2015		Ended 12/31/2016
	Current Assets
		Cash	1450		1,250
		Accounts Receivable	4250		3,050
		Raw Materials	1500		1,500
		Finished Goods	4050		3,300
		Total Current Assets	11250		9,100
	Fixed Assets
		Land	2500		2,500
		Plant and equipment	20800		19,300
		Less Accumulated depreciation	8350		8,000
		Net plant and equipment	12450		11300
		Total Fixed Assets	14950		13800
	Other Assets		1250		1,250
	Total Assets		27450		24,150
	Liabilities and Net Worth
	Current Liabilities
		Accounts Payable	1120		950
		Notes Payable	3000		2,500
		Due Contractor	3400		500
		Accrued taxes	1250		940
		Total current liabilities	8770		4,890
	Long-term liabilities		8500		8,500
	Common Stock		4250		4,300
	Retained earnings		5930		6,460
	Total Liabilities and net worth		27450		24,150

Answer 1

1. The net income of the company has increased by 25% from the previous year. Also, the dividend paid has increaed from the previous year. Thus, it indicates that the performance of the compnay has accreted. While the cash balance of the company has decreased from the previous year,it does not have any effect on its liquidity position.

Conclusion: The company,s growth in terms of profit has increased as well as its liquidity position is safe.

2. The company has paid its current liabilities during the current year out of the idle cash in hand. The payment of the liabilities is a good indication for the compamy by increasing its credibility in the market. Whereas the non payment of the liabilities would have meant increased payments of interest. Thus, it cannot be said that the company is in any danger of running out of cash as the idle funds have been used in liabilities and other projects.

3. the free cash flows can be calculated as follows:

cash flow genreating from operating activities- capital expenditure

the free cash flows of the company however is negative.