Recommendation Chemalite had a promising first year and will likely continue to make profits for its shareholders over the next five years. Problem Statement The first year of business is important for predicting the future success of a company. The aim of the memo is to analyze the financial data from Chemalite and make a recommendation on the prospects of holding investments in Chemalite. Key Points • Zero liabilities • Positive net income • Negative cash flow from operating activities
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THE GEORGE wASHINGTON UNIVERSITY | Case Study- Chemalite‚ Inc. | EMSE 6430 : Finance For Engineers | | 11/8/2012 | | Chemalite‚ Inc. Assume during 2003‚ you had been retained as a management consultant to Chemalite‚ Inc.‚ specifically to Bennett Alexander‚ principal stock holder and CEO. He wanted your help and advice. He needed your assistance on the issues below. Your counsel and two written reports were requested: The first report covers the 1st six months of operations.
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Journal Entries for Jan 1‚ 2003 to Dec 31‚ 2003 1/2 | Cash | | 375000 | | | | Capital Stock | | 375000 | 1/2 | Patent | | 125000 | | | | Capital Stock | | 125000 | 1/15 | Inc. Expenses | | 7500 | | | | Cash | | 7500 | 6/15 | PPE | | 62500 | | | | Cash | | 62500 | 6/24 | Inventory | | 75000 | | | | Cash | | 75000 | 7/1 | Service Expense | | 23750 | | | | Cash | | 23750 | 12/31 | Account Receivables | | 69500 | | | Cash | | 685000 | |
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Problem Set #2: Chemalite Case 1. Record the effects of Chemalite’s 1991 events on the BSE worksheet Cash Flow type (O‚ I‚ F) Event Cash A/R 375‚000 F P1 (7‚500) I P2 (62‚500) I P3 (75‚000) O P4 230‚000 - O O O O O O I F - T1 T2 T3 T4 T5.1 T5.2 T6 T7.1 T7.2 O1 O2 O3 O4 O5 Total (23‚750) 685‚000 69‚500 (175‚000) (22‚500) (350‚000) (80‚000) (150‚000) 50‚000 (50‚750) Inventory 75‚000 75‚000 Patent Cap. Exp. PPE 125‚000 7‚500 62‚500
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Assignment for Chemalite‚ Inc. Part A: Financial statements for Chemalite‚ Inc. 1) Balance Sheet as at 12/31/2003 | | | ASSETS | | | Current Assets | | | Cash | | $113‚000 | Accounts Receivable | | 69‚500 | Inventory | | 55‚000 | Total Current Assets | | 237‚500 | Machinery | | 201‚875 | Prototype | | 23‚750 | Intangible Assets | | 100‚000 | TOTAL ASSETS | | 563‚125 | | | | LIABILITIES AND SHAREHOLDERS’ EQUITY | | | Current Liabilities
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Chemalite‚ Inc. Bennett Alexander is correct when he believes that things are going well. The point to this case study is to explain to the stockholders in Chemalite‚ Inc. that the new business is in fact a good investment. Mr. Larson (stockholder with little business experience) states‚ “…six months ago‚ we had $375‚000 and now we have $230‚000. By my reckoning‚ we’ve managed to lose $145‚000 in six months and haven’t much to show for it.” Before Mr. Larson ever invested‚ a professional
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Income Statement - 1H03 A B 1 Chemalite‚ Inc. 2 Income Statement from January 1‚ 2003 to June 30‚ 2003 3 4 Sales $0 5 Cost of Sales $0 6 Gross Profit $0 7 Depreciation Expenses $0 8 Operating Expense ($7‚500) 9 Net Income ($7‚500) 10 Cash Flows - 1H03 A B 1 Chemalite‚ Inc. 2 Cash Flows Statement from January 1‚ 2003 to June 30‚ 2003 3 4 Cash flows from Operating Activities 5 Cash collections $0 6 Cash payments for purchases ($75‚000) 7 Cash payments for
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Chemalite‚ Inc. Bennett Alexander has invented a glow light using a series of chemicals into a contraption he calls Chemalites. He starts up his business by getting $500‚000 from investors and he tries to put his invention on the market. But by the end of 2003‚ with operations in full swing for a good six months‚ Chemalite‚ Inc. is seeing its cash balance drop tremendously‚ which Alexander and his investors view as a negative. Even though they thought their business was doing well‚ the numbers
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EXECUTIVE SUMMARY In the case of Chemalite‚ Inc. we analyzed the financial data provided by one of the largest stockholders of the company‚ Bennett Alexander‚ and the company’s bookkeeper. According to given expenditures‚ transactions‚ cash outflows and other related financial information; we prepared transaction journals‚ T-accounts‚ income statements‚ statements of financial position and statements of cash flows for the six months ended June 30‚ 2003 and for the year ended December 31‚ 2003. We
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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 (Actual) |December
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