Investment Analysis and Portfolio Management Case 2
Ada Lam is the founder and sole stockholder of AL Gifts, Co. Ltd., Ada is a recent divorcee and realizes that her finances may need to be revised now that her divorce has been settled. Her former husband, Kelvin, is the father of her two children and the major stockholder of GOOD Manufacturing, Co. Ltd., GOOD Manufacturing has been in business 15 years, is financially stable, and currently has a book value in excess of $380M. Kelvin has agreed to pay for 50% of their children’s education.
Personal Information
|
Name |
Age |
Health |
Occupation |
|
Ada Lam |
39 |
Good |
President – AL Gifts, Co. Ltd. |
|
Susan Lam |
14 |
Excellent |
Student |
|
Candy Lam |
9 |
Excellent |
Student |
|
Kelvin Lam |
42 |
Excellent |
President – GOOD Manufacturing, Inc. |
Ada Lam
STATEMENT OF FINANCIAL POSITION
As at Aug 31, 2018
|
ASSETS |
LIABILITIES |
|||
|
Cash/Cash equivalents |
$ 100,000 |
Credit cards 1 |
$ 260,000 |
|
|
NAV of AL Gifts, Co. Ltd. |
576,000 |
Mortgage 2 |
8,432,529 |
|
|
Residence (bought 5 yrs ago, 763 sq. ft 3-Bedroom apt) |
13,800,000 |
Auto loan3 |
423,137 |
|
|
Auto (BMW 325is, bought 1/2 year ago) |
530,000 |
TOTAL LIABILITIES |
$ 9,115,666 |
|
|
NET WORTH |
$ 5,890,334 |
|||
|
TOTAL ASSETS |
$15,006,000 |
TOTAL LIABILITIES AND NET WORTH |
$ 15,006,000 |
1 Variable rate, currently 35.71% APR.
2 25 years left with P-2.95% (2.05%)
3 2.5 years left with fixed flat rate at 2.15% for 3 years
Ada Lam
PROJECTED MONTHLY CASH FLOW STATEMENT
Current Monthly
|
CASH INFLOWS |
|
|
Gross salary |
$ 60,000 |
|
Child support |
25,000 |
|
Total |
$ 85,000 |
|
CASH OUTFLOWS |
|
|
Savings and investments |
$ 0 |
|
Mortgage payment (P+I) |
35,948 |
|
Maintenance and repairs on the home |
2,000 |
|
Textbook and miscellaneous (2 Kids) |
600 |
|
Food and supplies |
6,500 |
|
Utilities (Electricity, water, gas) |
3,500 |
|
Transportation (gas, oil, repairs) |
9,000 |
|
Car payment |
14,105 |
|
Clothing |
2,000 |
|
Travel and entertainment |
3,500 |
|
Credit card payments |
4,500 |
|
Total |
$ 81,653 |
|
SURPLUS/(DEFICIT) CASH FLOW |
$3,347 |
AL GIFTS, CO.LTD.
BALANCE SHEET
As at March 31, 2018
|
ASSETS1 |
LIABILITIES |
|||
|
Cash/Cash equivalents |
$ 200,000 |
Accounts payable |
$298,000 |
|
|
Accounts receivable |
400,000 |
Loan2 |
500,000 |
|
|
Inventory |
600,000 |
TOTAL LIABILITIES |
$798,000 |
|
|
Furniture and fixtures, net of depreciation |
130,000 |
STOCKHOLDER EQUITY |
$576,000 |
|
|
Prepaid expenses & other |
44,000 |
|||
|
TOTAL ASSETS |
$1,374,000 |
TOTAL LIABILITIES AND SHAREHOLDER EQUITY |
$1,374,000 |
1 All assets are listed at fair market value (FMV)
2 $2,000 a month payable to Kelvin Lam at 4.8% interest, which is the going market rate on similar loans.
AL GIFTS, CO. LTD
PROJECTED MONTHLY INCOME STATEMENT
|
TOTAL SALES |
$215,000 |
|
|
EXPENSES |
||
|
Cost of goods sold |
$ 75,250 |
|
|
Advertising and promotion |
1,500 |
|
|
Depreciation |
2,400 |
|
|
Interest on loan |
2,000 |
|
|
Insurance – business |
250 |
|
|
Rent (300 sq. ft.) |
11,000 |
|
|
Salaries (1part time staff & herself) |
68,500 |
|
|
Supplies and miscellaneous |
3,500 |
|
|
Utilities |
1,200 |
(165,600) |
|
NET INCOME |
49,400 |
Ms. Lam’s investment objective is to ensure financial security for herself, her business & her children. She plans to send her children to Australia for 5 years (last 2 year of high school and 3 years university) to receive western education.
Ms. Lam wants to pay off the $500,000 loan borrowed from Kelvin (her ex-husband) and be able to save enough funding (approx. $1.5M) to expand her business. She finally would like to retire when she turns 65 years old.
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