Assignment 2 Weeks 4 5finance Accounting Senior Accountant Anal ✓ Solved

ASSIGNMENT 2 – Weeks 4 & 5 Finance & Accounting: Senior Accountant Analysis Due Date: Week 5 Note: While representative of possible situations faced by SunsTruck Sunglasses, all scenarios in this assignment are fictional. Real Business Large discount retailers like Target and Walmart employ large teams of Finance and Accounting professionals to help measure and understand the financial health of the business. Financial and accounting information helps these businesses make educated financial decisions, such as whether or not to continue partnering with a retail supplier. While often smaller businesses, it is equally important for these retail suppliers to use financial and accounting data to make educated decisions, such as the best approach to gaining additional funding.

Your Role This week, you’ll assume the role of Senior Accountant with SunsTruck Sunglasses. What is a Senior Accountant? Senior Accountants take ownership of reporting costs, profitability, margins and expenditures for a given business. They use the principles of accounting to analyze sales information, create financial reports, make recommendations about the financial health of the company, and more. They are also responsible for training junior accounting staff.

For the last six months, SunsTruck has partnered with the discount retail store to run pop-up sunglasses stands in their stores for a big summer promotion. Due to the high customer purchase rate, the store has requested stock for five additional stores. SunsTruck needs to increase its production to meet the additional demand. In order to increase production, SunsTruck needs additional money. In this assignment, you will need to help determine which type of financing option is best for your company and train your junior accountants on the accounting cycle and financial statements.

Instructions Step 1: Financing The junior accounting team has assembled a Financing Report that (a) offers three options for securing the additional funds required to meet the new order; and (b) details the criteria Shaun, the owner of SunsTruck, would like you to consider when choosing one of the options. Based on this report: · Identify which financing option you think is the best option for SunsTruck to pursue given Shaun’s constraints. Explain the rationale for your decision. Note: You should complete Steps 2 & 3 after reading the material in Week 5. Step 2: Accounting Cycle A junior accountant is working to get everything in order for the new financing and has come to you with a question about what do next in the accounting cycle. · Read the email the junior accountant sent you and identify the best next step to take in the accounting cycle.

Explain your reasoning. Step 3: Financial Statements A potential investor has been identified, but before it is willing to commit, it has requested information about SunsTruck’s current debt from the junior accountants. · Identify the correct financial statement for your junior accountants that will provide the investor with the information it has requested. Explain to your junior accountants why you are giving them this financial statement and where the debt information is located. Step 4: Financial Analysis If you were the type of financier selected in Step 1, would you invest in SunsTruck? Explain the rationale for your decision.

Points: 110 Assignment: Finance & Accounting – Senior Accountant Analysis Criteria Unacceptable Below 70% F Fair 70-79% C Proficient 80-89% B Exemplary 90-100% A 1. Identify the best financing option and explain your reasoning. Weight: 30% Does not accurately identify financing option; explanation lacks logic and supporting information. Demonstrates inadequate understanding of finance. Accurately identifies financing option; minimally supports answer with logical explanation and information from the Financing Report and/or course material; OR Does not accurately identify financing option; adequately supports answers with information from the Financing Report and/or course material.

Demonstrates adequate understanding of finance. Accurately identifies financing option; adequately supports answer with logical explanation and information from the Financing Report and/or course material. Demonstrates good understanding of finance. Accurately identifies financing option; thoroughly supports answer with logical explanation and specific information from the Financing Report and course material. Demonstrates excellent understanding of finance.

2. Identify the next step in the accounting cycle for the junior accountant to complete and explain your reasoning. Weight: 20% Does not accurately identify accounting cycle step; explanation is missing or lacks logic and supporting information. Demonstrates inadequate understanding of accounting. Accurately identifies accounting cycle step; minimally supports answer with logical explanation and information from course material; OR Does not accurately identify financing option; adequately supports answers with information from course material.

Demonstrates adequate understanding of accounting. Accurately identifies accounting cycle step; adequately supports answer with logical explanation and information from course material. Demonstrates good understanding of accounting. Accurately identifies accounting cycle step; thoroughly supports answer with logical explanation and specific information from course material. Demonstrates excellent understanding of accounting.

3. Identify the best financial statement to provide to the potential investor and explain your reasoning. Weight: 20% Does not accurately identify financial statement and/or explanation is missing or lacks logic and supporting information. Demonstrates inadequate understanding of financial statements. Accurately identifies financial statement; minimally supports answer with logical explanation and information from financial statements and/or course material; OR Does not accurately identify financial statement; adequately supports answers with information from financial statements and/or course material.

Demonstrates adequate understanding of financial statements. Accurately identifies the financial statement; adequately supports answer with logical explanation and information from financial statements and course material. Demonstrates good understanding of financial statements. Accurately identifies financial statement; thoroughly supports answer with logical explanation and specific information from financial statements and course material. Demonstrates excellent understanding of financial statements.

4. Recommend whether or not, you as the financier, should invest in SunsTruck and explain reasoning. Weight: 20% Makes no recommendation and/or does not provide supporting explanation or information. Demonstrates inadequate understanding of financial analysis. Makes a recommendation; minimally supports answer with logical explanation and information from financial statements and/or course material.

Demonstrates adequate understanding of financial analysis. Makes a recommendation; adequately supports answer with logical explanation and information from financial statements and course material. Demonstrates good understanding of financial analysis. Makes a recommendation; thoroughly supports answer with logical explanation and specific information from financial statements and course material. Demonstrates excellent understanding of financial analysis.

5. Write in a professional manner using correct grammar and spelling and appropriate citations. Weight: 10% Writing does not meet minimal standards. Tone is not professional. Lacking in logic, clarity, and/or consistent formatting.

Contains many spelling and/or grammatical errors. Does not include citations or they do not allow the reader to locate the source. Writing is satisfactory. Professional tone is developing. Shows moderate logic, clarity, and/or consistent formatting.

May contain more than 2-4 spelling and/or grammatical errors. Includes citations but they may be inconsistently formatted or they do not easily allow the reader to locate the source. Writing is mostly good. Tone is professional. Shows logic, clarity, and consistent formatting.

May contain few or no spelling and/or grammatical errors. Includes citations that allow the reader to locate the source. Writing is excellent. Tone is professional and sophisticated. Shows logic, clarity, and consistent formatting.

Contains no spelling or grammatical errors and work is cited consistently so that the reader can locate the work cited. ASSIGNM E NT Finance and Accounting Senior Accountant Analysis 1 DU E DATE Week 5 S T R AY E R U N I V E RS I T Y | CO PY R I G H T © . A L L R I G H TS R E S E RV E D. SHAUN’S CRITERIA Hi Team, I wanted to provide you some guidelines as you determine how we’ll finance our expansion. Please give this careful consideration, as we need to get this right.

1. I estimate we’ll need 0,000 to increase capacity in order to stock the five additional pop-up stands 2. We’ll need to make sure we have additional funds available to increase our marketing efforts to stimulate demand 3. I’d like to maintain or increase our profit margins 4. If we’re successful over the next two years, we’ll likely seek additional capital to expand into more stores, so I’d like to do all we can now to enhance our credibility We need to move on this quickly, so I’d like an answer by the end of the week. -Shaun S T R AY E R U N I V E RS I T Y | CO PY R I G H T © .

A L L R I G H TS R E S E RV E D. 2 FINANCING OPTIONS Option 1: Equity Raise 0,000 from a venture capital firm in exchange for 30% of the company Option 2: Debt Secure a loan of 0,000 at a 10% annual interest rate, to be repaid over 7 years Option 3: Debt + Self-Financing Secure a loan of 0,000 at a 7% annual interest rate, to be repaid over 7 years, and self- finance the remaining ,000 JUNIOR ACCOUNTANT EMAIL Hi, I’m working on expenses from the last quarter for the revised income statement, but I’m unsure of what to do next. I grouped similar transactions to compile the following list: How would you like me to proceed given where we are in the process? Thanks in advance for your guidance.

Best, Jenna S. • automotive maintenance cost • travel expenses • training and development costs • office rent • raw material purchases • inventory purchases • marketing expenses • payroll expenses • interest expenses • technology purchases • office supplies expenses S T R AY E R U N I V E RS I T Y | CO PY R I G H T © . A L L R I G H TS R E S E RV E D. 3 SUNSTRUCK SUNG LASSES INCOME STATEMENT For Year Ended September 30, 2016 REVENUES Sales revenues Other revenue Total revenue COST OF GOODS SOLD (COGS) GROSS PROFIT EXPENSES Selling, general and administrative expenses Marketing and advertising expenses Total expenses INCOME FROM OPERATIONS OTHER EXPENSES Interest expense 8,590 ,000 9,590 (8,225) 1,365 (,959) (,271) (3,050) 8,314 (,000) 7,315 Income tax expense NET INCOME PRETAX INCOME (,060) ,500 Depreciation and amortization (,820) 2,255NET INCOME 4 S T R AY E R U N I V E RS I T Y | CO PY R I G H T © .

A L L R I G H TS R E S E RV E D. SUNSTRUCK SUNG LASSES BALANCE SHEET At September 30, 2016 ASSETS CURRENT ASSETS Cash Accounts receivable Merchandise inventories Total current assets LONG-TERM ASSETS Property, truck and equipment TOTAL ASSETS LIABILITIES CURRENT LIABILITIES 5,500 8,000 3,500 ,500 LONG-TERM LIABILITIES Truck loan Accounts Payable ,000 ,220 ,280 ,000 B+M loan 0,000 Total long-term liabilities TOTAL LIABILITIES 9,500 SHAREHOLDERS’ EQUITY CONTRIBUTED CAPITAL ,000 RETAINED EARNINGS TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY TOTAL SHAREHOLDERS’ EQUITY 2,000 2,000 4,000 3,500 Operating loan ,000 S T R AY E R U N I V E RS I T Y | CO PY R I G H T © .

A L L R I G H TS R E S E RV E D. 5 ,000 SUNSTRUCK SUNG LASSES STATEMENT OF CASH FLOWS For Year Ended September 30, 2016 CASH FLOWS FROM OPERATING ACTIVITIES Cash collected from customers Cash paid to suppliers and employees Cash paid for interest Cash paid for taxes Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Cash paid on truck loans ,140 (,000) (9,580) (,000) (,060) 3,780 Net cash used for investing activities CASH FLOWS FROM FINANCING ACTIVITIES Cash received from operating cash loan (,000) ,000 NET INCREASE IN CASH DURING YEAR CASH AT BEGINNING OF YEAR Net cash provided by financing activities (,255) CASH AT THE END OF YEAR TO DATE ,885 ,000 ,140 Cash paid on B+M loans (,000) NAME: INSTUCTOR: DATE: Assignment 2 FINANCE & ACCOUNTING – SENIOR ACCOUNTANT Analysis Due Date: Week 5 Note: While representative of possible situations faced by SunsTruck Sunglasses, all scenarios in this assignment are fictional.

Real Business Large discount retailers like Target and Walmart employ large teams of Finance and Accounting professionals to help measure and understand the financial health of the business. Financial and accounting information helps these businesses make educated financial decisions, such as whether or not to continue partnering with a retail supplier. While often smaller businesses, it is equally important for these retail suppliers to use financial and accounting data to make educated decisions, such as the best approach to gaining additional funding. Your Role This week, you’ll assume the role of Senior Accountant with SunsTruck Sunglasses. What Is a SENIOR ACCOUNTANT?

Senior accountants take ownership of reporting costs, profitability, margins and expenditures for a given business. They use the principles of accounting to analyze sales information, create financial reports, make recommendations about the financial health of the company, and more. They are also responsible for training junior accounting staff. For the last six months, SunsTruck has partnered with the discount retail store to run a pop-up sunglasses stand in their stores for a big summer promotion. Due to the high customer purchase rate, the store has requested stock for five additional stores.

SunsTruck needs to increase its capacity to meet the additional demand. In order to do so, SunsTruck needs additional money. In this assignment, you will need to help determine which type of financing option is best for your company and train your junior accountants on the accounting cycle and financial statements. Instructions Step 1: FINANCING The junior accounting team has assembled a Financing Report that (a) offers three options for securing the additional funds required to meet the new order; and (b) details the criteria Shaun, the owner of SunsTruck, would like you to consider when choosing one of the three options. Based on this report: · Identify which financing option you think is the best option for SunsTruck to pursue given Shaun’s constraints.

Underline your selection: Option 1: Equity Option 2: Debt Option 3: Debt + Self-Financing Explain the rationale for your decision. Note: You should complete Steps 2 & 3 after reading the material in Week 5. Step 2: ACCOUNTING CYCLE A junior accountant is working to get everything in order for the new financing and has come to you with a question about what do next in the accounting cycle. · Read the email the junior accountant sent you and identify the best next step to take in the accounting cycle. Explain your reasoning. Step 3: FINANCIAL STATEMENTS A potential investor has been identified, but before it is willing to commit, it has requested information about SunsTruck’s current debt from the junior accountants.

Identify the correct financial statement for your junior accountants that will provide the investor with the information it has requested. Underline your selection: Income Statement Balance Sheet Cash Flow Statement Explain to your junior accountants why you are giving them this financial statement and where the debt information is located. Step 4: FINANCIAL ANALYSIS If you were the type of financier selected in Step 1, would you invest in SunsTruck? Explain the rationale for your decision. 1 BUS508: CONTEMPORARY BUSINESS

Paper for above instructions

Step 1: Financing Options Assessment

As the Senior Accountant for SunsTruck Sunglasses, I must evaluate the available financing options to determine which is best suited to meet Shaun’s criteria. The three financing options presented are as follows:
1. Equity Raise: 0,000 from a venture capital firm in exchange for 30% of the company.
2. Debt: Secure a loan of 0,000 at a 10% annual interest rate, to be repaid over seven years.
3. Debt + Self-Financing: Secure a loan of 0,000 at a 7% annual interest rate, to be repaid over seven years, and self-finance the remaining ,000.
Analyzing these options reveals that the Debt + Self-Financing option is the most favorable for SunsTruck Sunglasses. Here are the reasons:
1. Cost of Capital: The loan option at 7% interest is lower than the 10% interest rate of the alternative full debt option. The lesser interest cost will help maintain or increase profit margins (Brigham & Ehrhardt, 2016).
2. Equity Dilution: Option 1, Equity Raise, forces the company to dilute ownership by giving up 30% of the company in exchange for funds. This is particularly unaffordable considering that, should the venture be successful, Shaun may want to raise additional funds, thereby further diluting ownership (Metrick & Yasuda, 2010).
3. Flexibility for Future Growth: The combination of debt and self-financing puts SunsTruck in a more flexible position regarding its expansion plans in the future. By not giving away equity now, the company retains full control, positioning it better to attract further investment without the drawbacks of shared ownership (Brealey, Myers, & Allen, 2017).
In summary, the Debt + Self-Financing route aligns best with Shaun's intent to maintain or increase profit margins and not jeopardize future funding opportunities while minimizing capital expenses.

Step 2: Next Step in the Accounting Cycle

In response to Jenna's email regarding the accounting cycle, the best next step for her to complete would be to prepare journal entries. This phase comes after collecting transaction data and subsequently grouping similar expenses. Journal entries are crucial in recording financial transactions that will feed into the company's financial records, ensuring accuracy in financial reporting (Kimmel, Weygandt, & Kieso, 2016).
Once journal entries are made, SunsTruck will be able to maintain an organized accounting system that provides valuable information for the preparation of financial statements. For example, each grouped expense that Jenna has compiled (e.g., office rent, raw material purchases) must have corresponding debits to the relevant expense accounts and credits to cash or accounts payable to accurately reflect the impact on the company’s finances.
This step has the potential to impact the company's financial health reports significantly, thereby influencing any future financial decisions.

Step 3: Financial Statement for Investor Inquiry

To provide the potential investor with the information about SunsTruck’s current debt, the Balance Sheet is the appropriate financial statement. The Balance Sheet presents a snapshot of the company's financial position at a specific point in time, detailing both assets and liabilities (Wild, Shaw, & Chiappetta, 2014).
On the Balance Sheet, the investor can find debt information categorized under “Liabilities.” This includes both current liabilities (such as accounts payable and short-term loans) and long-term liabilities (such as bank loans). For SunsTruck, a critical section will be the “Total Liabilities,” which aggregates the various debts SunsTruck holds.
Using the Balance Sheet allows the investor to evaluate the total debt relative to equity and assets, thus assessing the firm's financial leverage and risk profile, important factors in determining investment viability.

Step 4: Financial Analysis and Investment Decision

If I were the type of financier indicated in Step 1, I would be cautious about investing in SunsTruck, primarily due to the company's high debt levels showcased in the Balance Sheet. The current debt-to-equity ratio indicates reliance on borrowed capital, increasing financial risk, especially in a market with shifting consumer demands and economic uncertainties (Vance, 2014).
However, the promising rise in revenue from the successful pop-up stands is a positive sign, suggesting that demand exists for SunsTruck's products. The investment would hinge on the ability of SunsTruck to maintain and grow its profit margins despite these debts. A focus on increasing marketing efforts and bolstering brand recognition, as Shaun noted, is crucial in this regard.
On the flip side, if SunsTruck can demonstrate strong cash flows and operational efficiency post-funding, a potential investor could find the risk warranted (Damodaran, 2010). Therefore, even as a cautious financier, the potential for high returns can encourage a decision to invest made cautiously if SunsTruck proves its capability to handle the current financial burdens while growing its market presence.

Conclusion

In summary, through rigorous analysis of financing options, proper understanding of the accounting cycle, and leveraging financial statements, SunsTruck is equipped to attract adequate funding for its expansion. The informed recommendation for financing aligns with Shaun’s criteria, reflecting a robust strategy for overcoming financial hurdles while promoting growth.

References

1. Brealey, R. A., Myers, S. C., & Allen, F. (2017). Principles of Corporate Finance. McGraw-Hill Education.
2. Brigham, E. F., & Ehrhardt, M. C. (2016). Financial Management: Theory & Practice. Cengage Learning.
3. Damodaran, A. (2010). Applied Corporate Finance. Wiley.
4. Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2016). Financial Accounting. Wiley.
5. Metrick, A., & Yasuda, A. (2010). Venture Capital & the Finance of Innovation. Wiley.
6. Vance, T. W. (2014). Understanding Financial Statements. Deloitte Publishing.
7. Wild, J. J., Shaw, K. W., & Chiappetta, B. (2014). Fundamentals of Financial Accounting. McGraw-Hill Education.
8. Reilly, F. K., & Brown, K. C. (2012). Investment Analysis and Portfolio Management. Cengage Learning.
9. Gitman, L. J., & Zutter, C. J. (2015). Principles of Managerial Finance. Pearson.
10. Stoica, O., & Simon, O. (2016). Financial Risk Management. Springer.
This comprehensive review demonstrates that understanding and analyzing financial data is crucial for informed decision-making in any business context.