Artisan Flooring Products, Inc

Abstract

The owner of a small retail flooring company is projecting her company's financial performance and financial position for the current 2020 calendar year. The company began business in 2019, and by all measures, that first year had been a financial success. A small profit was earned, and the year ended in a strong financial position. But disruption caused by the COVID-19 pandemic has caused the need for new planning. A number of changes to business activity are projected, together enabling the construction of pro forma 2020 financial statements. Liquidity, profit, and the ability to take an annual owner's draw could then be assessed.This case is optimally used early in an introductory financial accounting course, or as a stand-alone exercise that illustrates the construction of financial statements. It can also be used as two distinct accounting analyses: (i) students can use the case data to reconstruct the 2019 balance sheet and income statement provided within the case exhibits, and (ii) they can also use the new projections to complete the 2020 pro forma financial statements. Excerpt UVA-C-2445 Dec. 16, 2020 Artisan Flooring Products, Inc. Jenny Zheng had been excited about the prospects for 2020. The previous year, the first for her company, had ended with an unexpected profit. The momentum going into the new year was strong. But by late February, it was clear that 2020 would be nothing like anyone had expected. The early stages of the COVID-19 pandemic had squashed demand, and Zheng found herself juggling potential government loan access and regulations, possible employee layoffs, and ever-changing local and national medical guidelines. Scenario planning around this new reality took on critical importance. The Company Artisan Floor Products, Inc. (AFP), was a retail flooring company serving do-it-yourself (DIY) consumers and professional flooring installers. It specialized in stone plastic composite (SPC), laminate, and glue-down vinyl flooring in a variety of lengths and colors. The most popular with customers was its SPC simulated wood grain finishes in either brown or gray. AFP did not install flooring, but rather sold ready-to-install products and supplies. . . .