1. After the first three months of doing business, you want to calculate some ratios to see how your business is doing. You are considering a loan in the amount of $20,000 to upgrade your store/office and you want to make sure that you can afford the loan payments ($750 per month for 3 years).
Use the income statement I provided and calculate at least two ratios that can be calculated from an income statement (Hint: not all ratios can be calculated from an income statement!)
Based on your calculations, comment on whether or not you should take out the loan for $20,000. Be specific and explain your decision in detail! (500 words; this includes the calculations, why you chose them and what they represent).
2. The previous discussion was about corporate governance and control. The assumption for your business is that you are starting out as either a sole proprietor or a limited liability company. Depending on your decision, explain in detail how corporate governance would apply to you, what your commitment to social responsibility would look like, and what you will do to ensure your business is sustainable and profitable in the long-term. (600 words)
Please include a cover page, a Table of Contents, and reference page.
| Income Statement Q1 2020 | ||||
| January | February | March | ||
| Sales | 8500.00 | 11000.00 | 18000.00 | |
| Cost of Good Sold (Material Expense) | (6500.00) | (6000.00) | ||
| Store utility expense ($300/3 months) | (100.00) | (100.00) | (100.00) | |
| Rent expense ($2400/3 months) | (800.00) | (800.00) | (800.00) | |
| Net income | 1100.00 | 4100.00 | 17100.00 | |
| Q1 Net income: $22,300 | ||||
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