Wicked Good Cupcakes is a bakery based in Boston that sells cupcakes both in-store and online.

The company was founded in 2011 and is a successful

Shark Tank venture (Wicked Good Cupcakes, 2018). For this assignment, financial information about Wicked Good Cupcakes (Figure 1) is consulted to answer the
following questions:

https://www.chegg.com/homework-help/questions-and-answers/2010-2011-net-sales-69-400-78-200-cost-goods-sold-45-000-50-200-depreciation-5-
100-6-100-n-q30767727

1) During 2011 how much cash did Wicked Good Cupcakes collect from sales?
beginning receivable = 5,700
net sales 2011 = 78,200
ending inventory = 8,700
Cash collection from sales = beginning receivable + net sales of 2011 - ending receivable
                                               = 5,700 + 78,200 - 8,700
                                               = 75,200

2. During 2011 what was the cost of goods produced by the company?
cost of goods produced = ending finished goods + cost of goods sold 2011 - beginning finished goods inventory
ending finished goods = 2,900
cost of goods sold 2011 = 50,200
beginning finished goods inventory = 3,900
cost of goods produced = 2,900 + 50,200 - 3,900
                                           = 49,200

3. Assuming that Wicked Good Cupcakes neither sold/salvaged assets during the year, what were the capital expenses during 2011?
capital expenses 2011 = net fixed asset at end - net fixed at beginning + depreciation

net fixed asset at end = 48,200 

net fixed at beginning = 40,400

depreciation = 6,100   

capital expenses 2011 = 48,200 - 40,400 + 6,100

                                       = 13,900

4. Assuming that there were no financing cash flows during 2011, using the information from above, what was Wicked Good Cupcake’s cash flow
from operations in 2011?
Change in cash = cash flow from operating activity + investing activity + financing activity
cash flow from operating activity = Change in cash -  investing activity - financing activity
Change in cash = ending cash balance - beginning cash balance 
                            = 13,500 - 8,600
                            = 4,900
investing activity = capital expenses 2011 = -13,900 (negative, debiting capital expenses)
financing activity = 0
cash flow from operating activity = 4,900 - (-13,900)
                                                          = 4,900 + 13,900
                                                          = 18,800

5. Does your analysis of these selected financial data justify O’Leary’s interest and partnership in Wicked Good Cupcakes? Explain.
Gross sales = credit sales + cash sales
                     = net sales - accounts receivable
net sales = 78,200              
accounts receivable = 8,700           
Gross sales = 78,200 - 8,700 + 5,700
                     = 75,200
Gross profit = Gross sales - cost of goods sold
                        = 75,200 - 50,200
                        = 25,000
Gross profit margin = Gross profit / net sales
= 25,000 / 78,200
                  = 0.3197
                   = 31.97%
Change in sales margin = (ending net sales – beginning net sales) / ending net sales
= (78,200 – 69,400) / 78,200
= 0.1125
= 11.25%
Growth of Net Income = Net Income * Change in sales margin
= 14,200 * 11.25
= 159,150

Current assets:
Cash                                                                       13,500    
Accounts receivable                                             8,700     
Finished goods inventory                                   2,900     
Total current assets                                            25,100

Current Liabilities:
Accounts payable                                                 4,400     
Total current liabilities                                         4,400

Working capital:
Current assets                                                    25,100
Less: current liabilities                                      (4,400)
Total working capital                                        20,700

Cash flow from operations:

Net Income                                                         14,200    
Depreciation                                                         6,100    
Working capital                                                 20,700
Net Cash flow from operations                       41,000

Ratios:
Current ratio = current assets / current liabilities
                       = 25,100 / 4,400
                       = 5.7
Acid test ratio = (Cash + current receivables + Short-term investments) / current liabilities
                         = (13,500 + 8,700 + 13,900) / 4,400
                        = 36,100 / 4,400
                        = 8.2
Cash ratio = Cash / current liabilities
                   = 13,500 / 4,400
                   = 3.1

Current ratio = 5.7: A good current ratio is between 1.2 to 2, which means that the business has 2 times more current assets than liabilities to
covers its debts. A current ratio below 1 means that the company doesn't have enough liquid assets to cover its short-term liabilities. 
Acid test ratio = 8.2: Businesses with an acid test ratio less than one do not have enough liquid assets to pay off their debts. If the difference
between the acid test ratio and the current ratio is large, it means the business is currently relying too much on inventory.
Cash ratio = 3.1: If the cash ratio is equal to 1, the business has the exact amount of cash and cash equivalents to pay off the debts. If the
cash ratio is less than 1, there’s not enough cash on hand to pay off short-term debt. If a company’s cash ratio is greater than 1, the business
has the ability to cover all short-term debt and still have cash remaining.
https://www.freshbooks.com/hub/accounting/good-liquidity-ratio#:~:text=A%20good%20current%20ratio%20is,cover%20its%20short
%2Dterm%20liabilities

Summary:
Net Cash flow from operations                       41,000
Total working capital                                        20,700
Profit margin                                                     31.97%
Change in sales margin 11.25%
Growth of Net Income 159,150

The analysis of these selected financial data justifies O'leary's interest and partnership in Wicked Good Cupcakes because of the positive
cash flow from operations, positive working capital and positive profit margin. These data indicate that the company is profitable and has a
stable financial health.

6. Based on the analysis above, if you were a Shark Tank investor, what would your offer be? Explain the rationale for your offer.
From a rational point of view, I would be willing to offer $159,150 for 30% interest, which would make the value of business to be $530,500
(159,150/30%). The rationale for this proposal is that the revenue is growing at a 11.25% per year, which implies a valuation multiple of
11.25x the net income which brings the value to $159,150. The justification for this interest is that I would provide necessary capital for
expansion as well as marketing network.