Question

I need help answering all parts with the questions.

6. Delish Dish, a small, local restaurant here in Jersey City is doing well financially and is thinking about opening up another location in Hoboken next year. The owners have focused so much on cooking delicious food that they haven't really kept up with their financial records. Since you come into the restaurant frequently, the owners know you are taking a corporate finance course and ask if you could help them out. Being a financial wizard, and nice person, you say you will give them your recommendation in exchange for a free meal. [20] Please use the following information to: 6a. Prepare a balance sheet. 6b. Prepare an income statement 6c. Compute free cash flow (otherwise known as "cash flow from assets"). Last year's current assets were $87,182 and current liabilities were $42,998. Last year's net fixed assets were $244,88 6d. Give your overall recommendation to whether or not they should open up a new shop next year. DeLish Dish, LLC. Mixed Financial Statement information Cost of Goods Sold 248,263 Cash 42,865 Depreciation 62,738 Interest Expense 13,831 Selling and Administrative Expense 50,469 Accounts payable 34,091 Net Fixed Assets 298,350 Sales 470,172 Accounts Receivable 26,078 Notes payable 24,955 Inventory 52,057 Long-term Debt 140,000 (Adapted from Ross, Westerfield, and Jordan, 2016 Chapter 2 Minicase)

Answer 1

1. Income Statement -

DeLish Dish, LLC Income Statement Sales (-) Cost of Goods Sold Gross Profit $ 470,172 $(248,263) $ 221,909 Expenses: Depreciation $ 62,738 Interest Expense $ 13,831 Selling and Administrative Expense $50,469 $ 127,038 Net Income $ 94,871

2. Balance Sheet -

DeLish Dish, LLC Balance Sheet Asset: Cash $ 42,865 Accounts Receivable $ 26,078 Inventory $ 52,057 Total Current Assets $121,000 Net Fixed Assets $ 298,350 Total Assets $ 419,350 Liabilities: Current Liabilities: Accounts Payable Notes Payable Total Current Liabilities $ 34,091 $ 24,955 $ 59,046 Long Term Debt $ 140,000 Total Liabilities $ 199,046 Equity: Owner's Capital $ 220,304 Total Liabilities & Owner's Equity $ 419,350

3. Free Cash Flow -

DeLish Dish, LLC Free Cash Flow Net Income Add: Non Cash Items Depreciation $ 94,871 $ 62,738 Less: Changes in Working Capital Increase in Current Assets Increase in Current Liabilities $ 33,818 $ 16,048 $ (49,866) Cash Flow from Operating Activities $ 107,743 (-) Capital Expenditure $ (53,469) Free Cash Flow $ 162,017

4. Analysis -

1. From the financials of the company it is clear that company is growing. Company's Gross Margin is 47% and Net Margin is 20% which is good.

2. Free Cash flow for the company is $162,017 which shows company has good cash available in hand to make investments.

3.Company's Interest Coverage is 6.86 times which shows company has good position.

Conclusion -

On the basis of above analysis DeLish Dish, LLC should open a new shop next year.