Scandi Home Furnishings, Inc. (Continued)SCANDI HOME FURNISHINGS, INC.BALANCE SHEETS201120122013Cash$ 50,000$ 40,000$ 10,000Accounts receivable200,000260,000360,000Inventories450,000500,000600,000Total current assets700,000800,000970,000Fixed assets, net300,000400,000500,000Total assets$1,000,000$1,200,000$1,470,000Accounts payable$ 130,000$ 170,000$ 180,000Accruals50,00070,00080,000Bank loan90,00090,000184,000Total current liabilities270,000330,000444,000Long-term debt300,000400,000550,000Common stock*350,000350,000350,000Retained earnings80,000120,000126,000Total liabilities and equity$1,000,000$1,200,000$1,470,000*350,000 shares of common stock were issued to Kaj Rasmussen and the venture investors whenScandi Home Furnishings was incorporated in mid-2010.Part AYour first challenge is to advise Kaj on what has been happening with Scandi Home Furnishings from a liquidity perspective.A. Kaj was particularly concerned by the drop in cash from $50,000 in 2011 to $10,000 in 2013. Calculate the averagecurrent ratio, the quick ratio, and the NWC-to-total-assets ratio for 2011-2012 and 2012–2013. What has happenedto Scandi's liquidity position?B. Kaj should be interested in knowing whether Scandi has been building or burning cash. Compare the cash build, cashburn, and the net cash build/burn positions for 2012 and 2013. What, if any, changes have occurred? MINICASEScandi Home Furnishings, Inc.Kaj Rasmussen founded Scandi Home Furnishings as a corporation during mid-2010. Sales during the first full year (2011)of operation reached $1.3 million. Sales increased by 15 percent in 2012 and another 20 percent in 2013. However, afterincreasing in 2012 over 2011, profits fell sharply in 2013, causing Kaj to wonder what was happening to his "pride-and-joy" business venture. After all, Kaj worked as closely as possible to a 24/7 pace, beginning with the startup of Scandiand continuing through the first three full years of operation.Scandi Home Furnishings, located in eastern North Carolina, designs, manufactures, and sells Scandinavian-designedfurniture and accessories to home furnishings retailers. The modern Scandinavian design has a streamlined and unclut-tered look. While this furniture style is primarily associated with Denmark, both Norwegian and Swedish designers havecontributed to the allure of Scandinavian home furnishings. Some say that the inspiration for the Scandinavian designcan be traced to the elegant curves of art nouveau from which designers were able to produce aesthetically pleasing,structurally strong modern furniture. Danish furnishings and the home furnishings produced by the other Scandinaviancountries-Sweden, Norway, and Finland-are made using wood (primarily oak, maple, and ash), aluminium, steel, andhigh-grade plastics.Kaj grew up in Copenhagen, Denmark, and received an undergraduate degree from a technical university in Sweden.As is typical in Europe, Kaj began his business career as an apprentice at a major home furnishings manufacturer inCopenhagen. After learning the trade, he quickly moved into a management position in the firm. However, after a fewyears, Kaj realized that what he really wanted tobusiness. At the same time, after travelling throughout the world, he was sure that he wanted to be an entrepreneur inthe United States. Kaj moved to the United States in early 2010. With $140,000 of his personal assets and $210,000from venture investors, he began operations in mid-2010. Kaj, with a 40 percent ownership interest and industry-relatedmanagement expertise, was allowed to operate the venture in a way that he thought was best for Scandi. Four yearslater, Kaj is sure he did the right thing.Following are the three years of income statements and balance sheets for Scandi Home Furnishings. Kaj felt that thathe would need to continue to expand sales to maintain a competitive advantage. After first concentrating on selling Scan-dinavian home furnishings in the Northeast in 2011 and 2012, he decided to enter the West Coast market. An increase inexpenses occurred associated with identifying, contacting, and selling to home furnishings retailers in California, Oregon,and Washington. Kaj Rasmussen hopes that you can help him better understand what has been happening to ScandiHome Furnishings from both operating and financial standpoints.was to start and operate his own Scandinavian home furnishingsSCANDI HOME FURNISHINGS, INC.INCOME STATEMENTS201120122013Net sales$1,300,000$1,500,000$1,800,000Cost of goods sold780,000900,0001,260,000Gross profit520,000600,000540,000Marketing130,000150,000200,000General and administrative150,000150,000200,000Depreciation40,00053,00060,000EBIT200,000247,00080,000Interest45,00057,00070,000Earnings before taxes155,000190,00010,000Income taxes (40%)62,00076,0004,000$ 93,000$ 114,000$ 74,000Net income$6,000Cash Dividends$$0(continued on next page)

Name: Scandi Home Furnishings, Inc. (Continued)SCANDI HOME FURNISHINGS, INC
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Description: Scandi Home Furnishings, Inc. (Continued)SCANDI HOME FURNISHINGS, INC.BALANCE SHEETS201120122013Cash$ 50,000$ 40,000$ 10,000Accounts receivable200,000260,000360,000Inventories450,000500,000600,000Total current assets700,000800,000970,000Fixed assets