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CHEMALITE

Chemalite, Inc. was founded in 1990 by Bennett Alexander to manufacture and sell Chemalite. Projected financial statements for 1992 show total assets increasing to $1.78 million from $539,375 in 1991. Net income is projected to rise to $118,995 in 1992 from $28,475 in 1991. While cash collections are projected at $1.82 million, large cash outflows for materials, labor, assets, and debt payments will reduce cash on hand to $9,490 by the end of 1992 according to the cash flow statement. Bennett is recommended to focus on collecting accounts receivables in the same financial year to avoid a cash shortfall.

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Purva Tamhankar
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4K views1 page

CHEMALITE

Chemalite, Inc. was founded in 1990 by Bennett Alexander to manufacture and sell Chemalite. Projected financial statements for 1992 show total assets increasing to $1.78 million from $539,375 in 1991. Net income is projected to rise to $118,995 in 1992 from $28,475 in 1991. While cash collections are projected at $1.82 million, large cash outflows for materials, labor, assets, and debt payments will reduce cash on hand to $9,490 by the end of 1992 according to the cash flow statement. Bennett is recommended to focus on collecting accounts receivables in the same financial year to avoid a cash shortfall.

Uploaded by

Purva Tamhankar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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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 December 31, 1992


(actual) (Pro-forma)
CASH $113,000 $9,490
TOTAL ASSETS $539,375 $1,783,150
TOTAL LIABILITIES AND OWNER’S $539,375 $1,783,150
EQUITY
NET INCOME $28,475 $118,995

Attached is the Cash Flow table for the projected year i.e., 1992.

The main sources of cash:

Cash collections $18,16,220


Sold Existing Equipment $2,15,500
Long term debt $5,10,000
Short term debt $2,00,000

Main uses of cash:

Cash payments (purchases and OPEX)


Materials ($473,150)
Labor ($660,000)
Inventory ($99,680)
Rent ($25,000)
Utilities ($82,000)
Advertising ($70,000)
R&D ($63,250)
Insurance ($97,500)
Salaries ($195,750)
Interest ($58,750)
Taxes Paid ($39,150)
Purchase of hard assets (machinery) ($945,000)
Stock buyback ($26,000)
Dividents Paid ($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.

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