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Unformatted text preview: tory (avg. turn = 6.7 in 95) 2 COGS (75.7% of sales in 95) 657 4 4,164 3 Gross Profit 1,337 Operating expenses (20.9% of sales) 1,150 Operating income Purchase discounts (2% of 4234­819) 3 6 187 68 7 Bank loan 4 73 8 Existing long term debt 5 20 9 Interest expense Profit before taxes Provision for income taxes 6 Net income 162 46.43 27 116 10 28 Footnotes with calculation details F1: Purchases = Ending inv + COGS ­ beginning inv (calculated first) F2. Based on avg. inventory turnover of 6.7, beg. inv. & COGS F3. Estimated purchases minus 819 already paid in Q1 F4. Assumes that the bank loan averaged 400 during Q1, and that all the credit line was used the following month and for the rest of the year .11x[(3/12)x400+(9/12)x750)] F5. Two semiannual installments of $10 (footnote c, exhibit 2) F6. = .15x50+.25x25+.34x25+.39x(162­100). See footnote c in exhibit 1 29 Pro-forma Balance Sheet Dec. 1996 Cash (1.4% of sales in last 3 yrs) 77 Accounts receivable (11.9% of sales in last 3 yrs) 655 Inventory (avg. turn of 6.7, used in IS) 657 Current assets 1,389 Net property (8% of sales in last 3 yrs) 440 Total assets 1,829 Notes payable, bank (plug) 965 Accounts payable (10/365 x purchases; take discounts) 116 Accrued expenses (1.5% of sales in last 3 yrs) 83 Current portion of L­T debt 20 Current liabilities 1,184 Term loan (falls by $20) 80 Total liabilities 1,264 Net worth (Net Worth in 95 + NI in 96) 565 Total liabilities and net worth 1,829 30 Evaluation of Financing Needs It appears that Clarkson’s capital requirements have been significantly understated in the first year. Clarkson would need $965,000 in order to: – Achieve a sales volume of $5.5 million and – Take full advanta...
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This document was uploaded on 03/09/2014 for the course COMM 371 at The University of British Columbia.

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