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Toy World 4444

Toy World 4444 - $2 million in 1994 with the understanding...

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Toy World, Inc. is a manufacturer for plastic toys for children. It was founded by David Dunton and Jack McClintock and was originally a partnership until it was incorporated in 1974. There David Dunton claimed 75% of common stock while McClintock took the final 25%. Dunton was named president of the company until his health deteriorated and McClintock eventually took over the presidency. Toy World, Inc. has experienced rapid growth since its founding and doesn’t look to stop anytime soon. Sales were approximately $8 million in 1993 and is projected to be somewhere close to $10 million in 1994. Net profits had reached $270,000 in 1993 and were estimated at $351,000 for 1994. The cost of goods sold had been roughly 70% of sales and looked to be remaining pretty similar for the up coming year. Expanding operations resulted in a strained working capital position. A loan of $752,000 was outstanding at the end of 1993 and McClintock was assured that the bank would extend his credit line to
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Unformatted text preview: $2 million in 1994 with the understanding that the loan will be repaid and off the books for atleast a 30 -day period during the year and be secured by the accounts receivable and inventory. The interest on the line of credit would be 9%. The company’s sales are seasonal with 80% volume sold between August and November. Although the company quoted net 30 days to pay, customers usually took 60 days. The process is not that complex and all runs are completed within the same day, meaning there was no work in process at the end of the day. Total purchases in 1994 were forecast at $3 million. The production manager believes that the company will be able to hold expenditures equal to depreciation, but is worried about reaching full capacity. In 1993, overtime expenses had amounted to $185,000. Production and sales amounts in each month tended to be equal. Pro forma income statements and balance sheets have been prepared for Mr. McClintock....
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