Professional Documents
Culture Documents
INCOME STATEMENTS
Net sales
Cost of Goods Sold:
Beginning inventory
Purchases
Total Inventory
Ending inventory
Total Cost of Goods Sold
Gross profit
Operating expenses
Salary Expenses
Earnings before interest and taxes
Interest expense
Net income before income taxes
Provision for income taxes
Net income
1993
1994
1995
$2,921.00
19.0%
$3,477.00
30.0%
$4,519.00
$1,062.00
$432.00
$3,579.00
$4,011.00
$587.00
$3,424.00
$1,095.00
$855.00
$85.00
$155.00
$56.00
$99.00
$22.00
$77.00
$587.00
$819.00
$1,406.00
$607.00
$799.00
$263.00
$221.50
$22.50
$19.00
$13.00
$6.00
$1.00
$5.00
$330.00
$2,209.00
$2,539.00
$337.00
$2,202.00
$719.00
$547.00
$75.00
$97.00
$23.00
$74.00
$14.00
$60.00
75.6%
75.4%
24.6%
18.7%
2.1%
$337.00
$2,729.00
$3,066.00
$432.00
$2,634.00
$843.00
$637.00
$80.00
$126.00
$42.00
$84.00
$16.00
$68.00
78.5%
75.8%
24.2%
18.3%
2.0%
79.2%
75.8%
24.2%
18.9%
1.7%
1996-Q1
77.1%
75.2%
24.8%
20.9%
0.5%
EXHIBIT - 2
BALANCE SHEETS
Cash
Accounts receivable, net
Inventory
Current assets
Property, net
Total Assets
Notes payable, bank
Note payable to Holtz, (C/P)
Notes payable, trade
Accounts payable
Accrued expenses
Term loan, current portion
Current liabilities
Term loan
Note payable, Mr. Holtz
Total Liabilities
Net worth
Total Liabilities + Net Worth
Return on Sales (Profit %)
Return on Assets
Return on Equity
Profit Margin
Asset Turnover
Equity Multiplier
1993
% Sales
$43.00
$306.00
$337.00
$686.00
$233.00
$919.00
$0.00
$0.00
$0.00
$213.00
$42.00
$20.00
$275.00
$140.00
$0.00
$415.00
$504.00
$919.00
1.47%
10.48%
11.54%
%
Assets
1994
% Sales
%
Assets
1995
% Sales
$52.00
$411.00
$432.00
$895.00
7.98%
$262.00
31.46%
$1,157.00
$60.00
$100.00
$0.00
$340.00
1.44%
$45.00
$20.00
29.92% $565.00
$120.00
15.23%
$100.00
$785.00
54.84% $372.00
$1,157.00
1.50%
11.82%
12.42%
$56.00
$606.00
$587.00
$1,249.00
7.54%
$388.00
33.28%
$1,637.00
$390.00
$100.00
$127.00
$376.00
1.29%
$75.00
$20.00
48.83% $1,088.00
$100.00
19.01%
$0.00
$1,188.00
32.15% $449.00
$1,637.00
1.24%
13.41%
12.99%
2.1%
6.5%
11.9%
2.1%
3.2
1.8
2.0%
5.9%
18.3%
2.0%
3.0
3.1
1.7%
4.7%
17.1%
1.7%
2.8
3.6
%
Assets
1996
$53.00
$583.00
$607.00
$1,243.00
8.59%
$384.00
36.22%
$1,627.00
$399.00
$100.00
$123.00
$364.00
1.66%
$67.00
$20.00
66.46% $1,073.00
$100.00
6.11%
$0.00
$1,173.00
27.43% $454.00
$1,627.00
% Sales
%
Assets
4.99%
54.90%
57.16%
36.16%
153.20%
1.48%
65.95%
6.15%
27.90%
0.5%
0.3%
1.1%
0.5%
0.7
3.6
EXHIBIT - 3
CASH FLOW STATEMENTS
1993 *
1994
$68.00
1995
$77.00
1996-Q1
$5.00
N.A
N.A
N.A
N.A
N.A
N.A
-$105.00
-$95.00
$0.00
$127.00
$3.00
-$70.00
-$195.00
-$155.00
$127.00
$36.00
$30.00
-$157.00
$23.00
-$20.00
-$4.00
-$12.00
-$8.00
-$21.00
N.A
N.A
-$29.00
-$29.00
-$126.00
-$126.00
$4.00
$4.00
N.A
N.A
N.A
N.A
N.A
N.A
N.A
$60.00
$100.00
$0.00
-$20.00
$100.00
-$200.00
$40.00
$330.00
$0.00
$0.00
-$20.00
-$100.00
$0.00
$210.00
$9.00
$0.00
$0.00
$0.00
$0.00
$0.00
$9.00
N.A
N.A
N.A
$9.00
$43.00
$52.00
$4.00
$52.00
$56.00
-$3.00
$56.00
$53.00
-$2.58
$71.58
-$74.16
-$74.16
$16.38
-$90.54
Net Income
N.A
$44.18
N.A
$52.00
$54.58
-$2.58
(*) 1993 Cash Flow not possible because data not given for 1992
EXHIBIT - 4
COMPARISON WITH INDUSTRIAL AVERAGES
Industrial Preview
Low Profit High Profit
1993
Cost of goods
Operating expense
Cash
Accounts receivable
Inventory
Fixed assets, net
Total Assets
76.90%
22.00%
1.30%
13.70%
12.00%
12.10%
39.10%
75.10%
20.60%
1.10%
12.40%
11.60%
9.20%
34.30%
75.4%
18.7%
1.5%
10.5%
11.5%
8.0%
31.5%
Current liabilities
Long-term liabilities
Equity
52.70%
34.80%
12.50%
29.20%
16.00%
54.80%
29.9%
15.2%
54.8%
1.31
(0.7%)
(1.8%)
(14.3%)
2.52
4.3%
12.2%
22.1%
2.5
2.1%
6.5%
11.9%
Current ratio
Return on sales
Return on assets
Return on equity
Other Ratios
1.3
41.5
37.7
34.7
44.5
(*) 1996 Full Year Data not available so it is not added here.
1994
1995
Percent of Total Sales
75.8%
75.8%
18.3%
18.9%
1.5%
1.2%
11.8%
13.4%
12.4%
13.0%
7.5%
8.6%
33.3%
36.2%
Percent of Total Assets
48.8%
66.5%
19.0%
6.1%
32.2%
27.4%
Ratios
1.6
1.1
2.0%
1.7%
5.9%
4.7%
18.3%
17.1%
0.8
44.7
42.6
44.9
42.4
0.6
46.8
48.3
37.8
57.2
N.A
N.A
N.A
N.A
N.A
N.A
N.A
N.A
N.A
N.A
N.A
N.A
EXHIBIT - 5
PROFORMA INCOME STATEMENT -1996
Net sales
Cost of Goods Sold:
Beginning inventory
Purchases
Total Inventory
Ending inventory
Total Cost of Goods Sold
Disconuts added back @ 2% (3)
Gross profit
Operating expenses
Salary Expenses
Earnings before interest and taxes
Interest expense (Note -1)
Net income before income taxes
Provision for income taxes (Note -2)
Net income
1993
1994
1995
$2,921.00
19.03%
$3,477.00
29.97%
$4,519.00
$330.00
$2,209.00
$2,539.00
$337.00
$2,202.00
$0.00
$719.00
$547.00
$75.00
$97.00
$23.00
$74.00
$14.00
$60.00
75.6%
75.4%
24.6%
18.7%
2.1%
$337.00
$2,729.00
$3,066.00
$432.00
$2,634.00
$0.00
$843.00
$637.00
$80.00
$126.00
$42.00
$84.00
$16.00
$68.00
78.5%
75.8%
24.2%
18.3%
2.0%
$432.00
$3,579.00
$4,011.00
$587.00
$3,424.00
$0.00
$1,095.00
$855.00
$85.00
$155.00
$56.00
$99.00
$22.00
$77.00
Average
21.71%
79.2%
77.8%
75.8%
75.6%
24.2%
18.9%
24.4%
18.7%
1.7%
1.9%
1996
$5,500.00
$587.00
$4,277.37
$4,864.37
$704.37
$4,160.00
$85.55
$1,425.55
$1,026.06
$90.00
$309.49
$110.49
$199.00
$60.86
$138.14
77.8%
75.6%
24.4%
18.7%
2.5%
EXHIBIT - 6
PROFORMA BALANCE SHEET - 1996
Cash
Accounts receivable, net
Inventory
Current assets
Property, net
Total Assets
Notes payable, bank
Note payable to Holtz, current portion
Notes payable, trade
Accounts payable
Accrued expenses
Term loan, current portion
Current liabilities
Term loan
Note payable, Mr. Holtz
Total Liabilities
Net worth
Total Liabilities + Net Worth
1993
$43.00
$306.00
$337.00
$686.00
$233.00
$919.00
$0.00
$0.00
$0.00
$213.00
$42.00
$20.00
$275.00
$140.00
$0.00
$415.00
$504.00
$919.00
% Sales
1.47%
10.48%
11.54%
7.98%
31.46%
1.44%
1994
$52.00
$411.00
$432.00
$895.00
$262.00
$1,157.00
$60.00
$100.00
$0.00
$340.00
$45.00
$20.00
$565.00
$120.00
$100.00
$785.00
$372.00
$1,157.00
% Sales
1.50%
11.82%
12.42%
7.54%
33.28%
1.29%
1995
$56.00
$606.00
$587.00
$1,249.00
$388.00
$1,637.00
$390.00
$100.00
$127.00
$376.00
$75.00
$20.00
$1,088.00
$100.00
$0.00
$1,188.00
$449.00
$1,637.00
% Sales Average
1.4%
1.24%
13.41% 11.9%
12.99%
8.59%
36.22%
8.0%
33.7%
1.66%
1.5%
AFN
1996
$77.13
$654.62
$704.37
$1,436.11
$441.80
$1,850.98
$966.89
$0.00
$0.00
$116.44
$80.52
$20.00
$1,183.84
$80.00
$0.00
$1,263.84
$587.14
$1,850.98
$0.00
% Sales
1.40%
11.90%
12.81%
8.03%
33.65%
1.46%
Inventory Days
DSO
PDP
Cash Conversion Cycle
COMMENTS
The company needs to reduce its inventory days or inventory level.
Better than last year.
10 Days, so taking in all discounts
(1) Major: Inventory Days or Invenotry Level of Stock (2) Improve DSO
Period (mon)
9
3
6+6
6+6
AFN
Amt Paid
Interest %
$966.89
$0.00
11%
$0.00
$399.00
11%
$0.00
$10+$10
10%
$0.00
$50+$50
11%
Total Interest Expense for 1996
Tax %
Amount
15%
$50.00
25%
$25.00
34%
$25.00
39%
$99.0
Total Tax Expense for 1996 $199.00
Amount
$79.77
$10.97
$11.50
$8.25
$110.49
Amount
$7.5
$6.3
$8.5
$38.6
$60.86
EXHIBIT - 7
PROFORMA INCOME STATEMENT 1996- QUARTERLY
1996 - 1st Qtr
Particulars
Net sales (1)
Cost of Goods Sold:
Beginning inventory
Purchases
Ending inventory
Total Cost of Goods Sold
Add: Disounts @ 2% of purchases
Gross profit
Operating expenses (5 & Note-3)
Salary Expenses
Earnings before interest and taxes
Interest expense
Net income before income taxes
Provision for income taxes
Net income
Amounts
% Sales
Amounts
% Sales
Amounts
% Sales
Amounts
$1,062.00
42.42%
$1,512.50
0.00%
$1,512.50
-6.58%
$1,413.00
$587.00
$819.00
$1,406.00
$607.00
$799.00
$0.00
$263.00
$221.50
$22.50
$19.00
$13.00
$6.00
$1.00
$5.00
77.12%
75.24%
20.86%
$6.00
$607.00
$1,166.42
$1,773.42
$635.48
$1,137.94
$23.33
$397.89
$282.17
$22.50
$93.23
$38.42
$54.80
$9.30
$45.50
77.12%
75.24%
18.66%
$60.80
% Sales
$635.48
$663.97
$1,166.42 77.12% $1,089.69 77.12%
$1,801.90
$1,753.65
$663.97
$690.58
$1,137.94 75.24% $1,063.08 75.24%
$23.33
$21.79
$397.89
$371.72
$282.17 18.66% $263.60 18.66%
$22.50
$22.50
$93.23
$85.61
$36.80
$36.54
$56.43 $117.23 $49.07 $166.30
$18.77
$19.14
$37.66
$29.93
EXHIBIT - 8
PROFORMA BALANCE SHEET 1996- QUARTERLY
Cash
Accounts receivable, net
Inventory
Current assets
Property, net
Total Assets
Notes payable, banks
Note payable to Holtz, current portion
Notes payable, trade
Accounts payable
Accrued expenses
Term loan, current portion
Current liabilities
Term loan
Note payable, Mr. Holtz
Total Liabilities
Net worth
Total Liabilities + OE
AFN
$53.00
142%
$583.00
142%
$607.00
$1,243.00
$384.00
142%
$1,627.00
$399.00
$100.00
$123.00
$364.00
$67.00
142%
$20.00
$1,073.00
$100.00
$0.00
$1,173.00
$454.00
$1,627.00
$0.00
$75.48
100.0%
$830.31
100.0%
$635.48
$1,541.27
$546.89
100.0%
$2,088.17
$1,206.23
$50.00
$0.00
$127.01
$95.42
100.0%
$20.00
$1,498.66
$90.00
$0.00
$1,588.66
$499.50
$2,088.17
$0.00
$75.48
93.4%
$830.31
93.4%
$663.97
$1,569.76
$546.89
93.4%
$2,116.65
$1,197.06
$50.00
$0.00
$127.01
$95.42
93.4%
$20.00
$1,489.49
$90.00
$0.00
$1,579.49
$537.16
$2,116.65
$0.00
$70.52
$775.69
$690.58
$1,536.78
$510.92
$2,047.70
$1,172.80
$0.00
$0.00
$118.65
$89.14
$20.00
$1,400.60
$80.00
$0.00
$1,480.60
$567.10
$2,047.69
$0.00
Inventory Days
DSO
PDP
Cash Conversion Cycle
52.5
49.4
10.0
91.9
58.5
49.4
10.0
97.9
Q1 -1996
$0.00
$0.00
$0.00
$0.00
$100.00
$0.00
$0.00
$100.00
$100.00
$0.00
$0.00
$100.00
$0.00
N.A
Q2 -1996
Q3-1996
Q4 -1996
Northrup National Bank
11%
$0.00
$1,206.23 $1,197.06
$1,206.23
-$9.17
-$24.26
$0.00
$0.00
$0.00
$1,206.23 $1,197.06 $1,172.80
$33.17
$33.17
$32.92
Holt'z
11%
$100.00
$50.00
$50.00
$0.00
$0.00
$0.00
$50.00
$0.00
$50.00
$50.00
$50.00
$0.00
$2.75
$1.38
$1.38
Term Loan
10%
$100.00
$90.00
$90.00
$0.00
$0.00
$0.00
$10.00
$0.00
$10.00
$90.00
$90.00
$80.00
$2.50
$2.25
$2.25
$38.42
$36.80
$36.54
ASSUMPTIONS FOR NOTE-4
1. Since the company has to get the AFN from Northrup Bank therefore the loan or AFN is not considered from the Suburban National Bank.
2. Interest expenses for Q1-1996 is not calculated here because it is already given in the case.
3. As mentioned in the case for first year i.e 1996 the interest %age will be 11%. Here we assumed that after 1st quarter the company took
the loan from Northrup National Bank.
4. Term loan: Opening = $120 (for first 6 months) and $110 (for last 6 months). By 31st Dec 1996 the closing will be $100 (with $80 as long
term and $20 as Current portion of long term).
5. Holtz opening balance = $100 (for first 6 months) and $50 (for last six months) and by 31st Dec, 1996 this $50 will be paid to Holtz. The
closing balance will be $0.
6. For simplicity the case of simple/normal interest is used for computing interest percentages.
7. Loans/Running Finance (from bank) are taken on the 1st day of quarter and is repaid on the last day of quarter.
8. The formula line should be checked for detailed information about calculation.
Tax %
15%
25%
34%
39%
-
96-Q1
$6.00
$0.00
$0.00
$0.00
$6.00
$0.90
$0.00
$0.00
$0.00
$0.90
96-Q2
$44.00
$6.60
$10.80
$2.70
$0.00
$0.00
$0.00
$0.00
$54.80
$9.30
96-Q3
$0.00
$0.00
$14.20
$3.55
$25.00
$8.50
$17.23
$6.72
$56.43
$18.77
96-Q4
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$49.07 $19.14
$49.07 $19.14
$6.00
$60.80
$117.23
$166.30
EXHIBIT -9
PROFORMA INCOME STATEMENT 1996 Method (a) -Yearly
Method (b) - Qtrly Combined
Particulars
Net sales
Cost of Goods Sold:
Beginning inventory
Purchases
Ending inventory
Total Cost of Goods Sold
Add: Disounts @ 2% of purchases
Gross profit
Operating expenses
Salary
Earnings before interest and taxes
Interest expense
Net income before income taxes
Provision for income taxes
Net income
Amounts
$5,500.00
$587.00
$4,277.37
$4,864.37
$704.37
$4,160.00
$85.55
$1,425.55
$1,026.06
$90.00
$309.49
$110.49
$199.00
$60.86
$138.14
% Sales
77.77%
77.8%
75.64%
75.6%
18.66%
18.7%
2.51%
1.9%
Amounts
$5,500.00
$2,493.45
$4,241.53
$6,734.98
$2,597.03
$4,137.95
$68.45
$1,430.50
$1,049.44
$90.00
$291.07
$124.76
$166.30
$48.21
$118.10
% Sales
77.12%
77.8%
75.24%
75.6%
19.08%
18.7%
2.15%
1.9%
EXHIBIT - 10
PROFORMA BALANCE SHEET 1996
Method (a) -Yearly
Particulars
Cash
Accounts receivable, net
Inventory
Current assets
Property, net
Total Assets
Notes payable, bank
Note payable to Holtz, current portion
Notes payable, trade
Accounts payable
Accrued expenses
Term loan, current portion
Current liabilities
Term loan
Note payable, Mr. Holtz
Total Liabilities
Net worth
Total Liabilities + Net Worth
Amounts
$77.13
$654.62
$704.37
$1,436.11
$441.80
$1,850.98
$966.89
$0.00
$0.00
$116.44
$80.52
$20.00
$1,183.84
$80.00
$0.00
$1,263.84
$587.14
$1,850.98
% Sales
1.40%
11.90%
12.81%
8.03%
33.65%
8.03%
33.65%
1.46%
1.46%
AFN
N.A
$1,206.23
$1,197.06
$1,172.80
Taken
N.A
$1,206.23
$0.00
$0.00
Paid
N.A
$0.00
$9.17
$24.26
% Sales
1.3%
14.1%
12.6%
9.3%
37.2%
8.03%
33.65%
1.6%
1.46%
EXHIBIT - 11
COMPARISON WITH INDUSTRIAL AVERAGES
Cost of goods
Operating expense
Cash
Accounts receivable
Inventory
Fixed assets, net
Total Assets
Current liabilities
Long-term liabilities
Equity
Current ratio
Return on sales
Return on assets
Return on equity
Industrial Preview
Clarkson Lumber Co.
Low Profit High Profit 1993
1994
1995 1996 (b)
Percent of Total Sales
76.90%
75.10%
75.4% 75.8% 75.8% 75.24%
22.00%
20.60%
18.7% 18.3% 18.9% 19.08%
1.30%
1.10%
1.5%
1.5%
1.2%
1.28%
13.70%
12.40%
10.5% 11.8% 13.4% 14.10%
12.00%
11.60%
11.5% 12.4% 13.0% 12.56%
12.10%
9.20%
8.0%
7.5%
8.6%
9.29%
39.10%
34.30%
31.5% 33.3% 36.2% 37.23%
Percent of Total Assets
52.70%
29.20%
29.9% 48.8% 66.5% 68.40%
34.80%
16.00%
15.2% 19.0% 6.1%
3.91%
12.50%
54.80%
54.8% 32.2% 27.4% 27.69%
Ratios
1.31
2.52
2.5
1.6
1.1
1.10
(0.7%)
4.3%
2.1%
2.0%
1.7%
2.15%
(1.8%)
12.2%
6.5%
5.9%
4.7%
5.77%
(14.3%)
22.1%
11.9% 18.3% 17.1% 20.82%
Other Ratios
1.3
41.5
37.7
34.7
44.5
0.8
44.7
42.6
44.9
42.4
0.6
46.8
48.3
37.8
57.2
0.60
58.5
49.4
10.0
97.9