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July-Sept 1986
3656
6664
3570
3808
Less Accumulated Depreciation Net fixed assets Other Assets Total Assets
2176
3727
980
1060
5005
6504
5005
6504
Stockholder's Equity Common Stock Additional capital Retained Earnings 1249 105 -330 1249 105 1297
1024
2651
Total L+OE
6029
9155
Notes payable calculated for each quarter of FY 1987 from Exhibit 4 is Quarter 1 Quarter 2 Notes payablebanks 2176 3727
The Notes Payable are less, therefore the company's plan is Feasible
Quarter 1 2 3 4
80% of (Account Receivable) $507,000 = $405,600. $1,965,600 + $405,600 = $2,371,200 > Notes Payable needed $2,176,000 Hence the company has sufficient amount of money for this quarter.
For the Second Quarter:70% of inventory $1,183,000. 80% of (Account Receivable) $3,664,000 $1,183,000 + $3,664,000 = $4,847,000 > Notes Payable needed $3,727,000. Hence the company has sufficient amount of money for this quarter.
For the Third Quarter:70% of inventory $816,200. 80% of (Account Receivable) $3,791,200 $816,200 + $3,791,200 = $4,607,400 > Notes Payable needed $3,041,000. Hence the company has sufficient amount of money for this quarter. For the Fourth Quarter:70% of inventory $1,308,300. 80% of (Account Receivable) $1,392,800 $1,308,300 + $1,392,800 = $2,701,100 > Notes Payable needed $1,650,000. Hence the company has sufficient amount of money for this quarter.
As per Balance Sheet Analysis, Account Receivables get Accumulated for Quarter 2 and Quarter 3. The current ratio for Quarter 1 is <1, Quarter 2 is >1, Quarter 3 is >1 and Quarter 4 is >1. Company has almost the healthy current asset to manage current Liabilities. However, with high Account Receivables in few Quarters can cause cash crunch and force company to bor Quarter 1 Current Assets Cash Receivables, net Inventories Prepaid expenses 100 507 2,808 241 100 4580 1,690 294 Quarter 2
3,656
6,664
1398
1564
2172
2244
201 6,029
247 9,155
Liabilities Accounts payable Notes payable banks 1,849 2176 1,717 3727
980
1,060
5005
6504
Long-term debt
0 0
0 0
1,249 105
1,249 105
-330
1297
1024
2651
6029
9155
Third Quarter FY 1987 Cash Budget by Months ($000) October $1,000 November $1,054
Cash receipts
Cash outflow For materials, labor, and operating expenses (except for interest) 830 Interest 54 Capital expenditures 69 Pay back stockholder loans 0
1,065 56 62 841
Collateral for bank loans at end of month Receivables Inventory Notes Payable
Monthly distribution of 3rd quarter of FY 1987 using exhibit 5 931700 Oct 954100 Nov 816200 Dec
The cash budget of November clearly shows that company will not be able to pay the stockholder's loan on because it exceeds the maximum limit of loan available.
Hanson can distribute the stockholder's loan repayment to Sept, Oct and Nov in order to repay it by Novem
Oct-Dec 1986
Jan-Mar 1987
6203
3993
3987
4288
1755
1664
3041
1650
207
189
5003
3503
5003
3503
3727
3142
8730
6645
Quarter 3 3041
Quarter 4 1650
er 2 and Quarter 3.
6,203
3,993
3987
4288
1743
1938
2244
2350
283 8,730
302 6,645
1,755 3041
1,664 1650
207
189
5003
3503
0 0
0 0
1,249 105
1,249 105
2373
1788
3727
3142
8730
6645
December $2,518
803 58 48 0