Case 1 - Clarkson Lumber Template.xlsx

# A trade payable is an amount billed to a company by

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A trade payable is an amount billed to a company by its suppliers for goods delivered to or services consumed by the company in the ordinary course of business. It is basically another form of accounts payable and should be included in the numerator. Accounts payable is more closely related to the purchases during the year than the cost of goods sold, so you could use purchases as the cost of sales in this case. This gives a better indication of how long it takes a company to pay its invoices from trade creditors, such as suppliers. ???????? )= )/(( )⁄365) ) (??????????? (???????? ??????? (???? ?? ????? ??? = ) ) ) (?????? ?????? (????? ?????? ???????? (?????? ?????????? = )/ )= ) (??? ?????? (?????? ?????? (??? ?????? /????? / ) ×????? (????? ?????? (????? ?????? /??????

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Total assets turnover Equity multiplier b b Equity multiplier = Total assets/ Equity = 1 + Debt-to-Equity ratio
days days % % % % %

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Status Quo Scenario 1 Assumptions: 1. The historical conditions that prevailed in 1993-1995 will continue in 1996. 2. The sales volume for 1996 will be \$5.5 million, as Mr. Clarkson anticipates. Balance Sheet Most Recent 1995 Input For 1996 Forecast Cash \$56 x 1996 sales Accounts receivable, net 606 x 1996 sales Inventory 587 x 1996 sales Current assets \$1,249 Property, net 388 x 1996 sales Total Assets \$1,637 Notes payable, bank \$390 Note payable to Holtz, current portion 100 Notes payable, trade 127 x 1996 sales Accounts payable 376 x 1996 sales Accrued expenses 75 x 1996 sales Term loan, current portion 20 Remains constant Current liabilities \$1,088 Term loan 100 Note payable, Mr. Holtz 0 Total Liabilities \$1,188 Net worth 449 Previous RE + Add. To RE Total Liabilities and Net Worth \$1,637 Check: Total Assets - Total Liabilities & Equity = Income Statement Most Recent 1995 Input For 1996 Forecast Net sales \$4,519 Cost of Goods Sold: Beginning inventory 432 2 Purchases 3,579 End Inventory - Beg Inventory + COGS \$4,011 Projected Financial Statements Year Ending December 31, 1996 (thousands)

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Ending inventory 587 x 1996 sales Total Cost of Goods Sold \$3,424 x 1996 sales Gross profit 1,095 Operating expenses 940 x 1996 sales Earnings before interest and taxes \$155 Interest expense Bank loan (.11 x average loan) 36 avg loan during year x .11 Existing fixed rate debt 20 term loan payment Net income before income taxes \$99 22 See table to the right Net income \$77 Provision for income taxes a a The first \$50,000 of pretax profits is taxed at a 15% rate; the next \$25,000 are taxed at a 25% rate; the next \$25,000 are taxed at a 34% rate \$100,000 but less than \$335,000 are taxed at a 39% rate.
Forecast 1996 Forecast 1996

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e; and profits in excess of
Improved Scenario 1 Assumptions: 1. The historical conditions that prevailed in 1993-1995 will continue in 1996. 2. The sales volume for 1996 will be \$5.5 million, as Mr. Clarkson anticipates. 3. All purchase discounts will be taken for the period April 1 to December 31, 1996. Trade Discount Months in 1996 Discount Taken months Balance Sheet Most Recent 1995 Input For 1996 Forecast Cash \$56 x 1996 sales Accounts receivable, net 606 x 1996 sales Inventory 587 x 1996 sales Current assets \$1,249 Property, net 388 x 1996 sales Total Assets \$1,637 Notes payable, bank \$390 Note payable to Holtz, current portion 100 Notes payable, trade 127 x 1996 sales Accounts payable 376 x 1996 sales Accrued expenses 75 x 1996 sales Term loan, current portion 20 Remains constant Current liabilities \$1,088 Term loan 100 Note payable, Mr. Holtz 0 Total Liabilities \$1,188 Net worth 449 Previous RE + Add. To RE

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• Spring '09
• Balance Sheet, Generally Accepted Accounting Principles, Mr. Holtz, Mr. Clarkson

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