1.

Assess the past financial performance of Bodie using statement of cash flows and financial ratio analysis
okay delegate later
2. Do a two year financial statement projection (2007 and 2008)
Prepare:
Statement of Earnings
of Retained Earnings
Sheets

3. What are BIS's financial requirements?

Determine the amount and type and term of the loan needed.

4. Do sensitivity analysis on your numbers to determine various requirement:

payables shorten lengthen
inventory
receivables.
What conclusions do you get from the various sensitivity analysis
nd financial ratio analysis
Exhibit 1
STATEMENT OF EARNINGS
(for years ending January 31)
2004 2005 2006 2007
Net sales 930,110.00 1,599,920.00 2,066,820.00 2,800,000.00
Cost of goods sold 644,190.00 1,171,760.00 1,476,840.00 1,996,893.83
Gross profit 285,920.00 428,160.00 589,980.00 803,106.17
Operating expenses
Wages and commissions 183,620.00 253,910.00 306,170.00 414,780.19
Rent1 19,430.00 22,200.00 11,100.00 0.00
Provision for doubtful accounts 6,710.00 0.00 0.00 0.00
General selling expenses 29,100.00 27,560.00 23,860.00 32,324.05
General administrative expenses 76,430.00 104,720.00 132,850.00 179,976.97
Amortization 0.00 10,300.00 24,360.00 46,528.00
Total operating expenses 315,290.00 418,690.00 498,340.00 673,609.22
Interest expense 27,230.00 29,220.00 33,750.00 24,164.00
Net income before tax (56,600.00) (19,750.00) 57,890.00 105,332.95
Net income carryover (56,600.00) (76,350.00) (18,460.00) 86,872.95
Income tax 0.00 0.00 0.00 19,980.78
Net income (loss)2 (56,600.00) (19,750.00) 57,890.00 66,892.17

1 With the purchase of the land and building in August 2005, rent expense had been eliminated.
2 Previous losses were carried forward, offsetting all taxes owing for 2006. BISs estimated tax rate was 23 per cent.
 2008 Assumptions 2007 Assumptions 2008
3,200,000.00 Case fact p2 Case fact p2
2,282,164.38 average of previous years ratio 0.6925954995 0.7323866193
917,835.62 0.4438442075

Case fact: same proportion as proportion as 2006,

474,034.51 2006, p3 p3 0.1974175098 0.1587016851
0.00 Case
Case fact
fact:p4
same proportion as Case fact p4as 2006,
proportion
0.00 2006, p3
Case fact: same proportion as p3
proportion as 2006,
36,941.78 2006, p3 same proportion as
Case fact: p3
proportion as 2006, 0.031286622 0.0172258613
205,687.97 2006, p3 2007 + additional
term debt p3
additional principal 0.0821730763 0.0654532727
111,924.00 principal payment of 40000 payment of 40000
828,588.25
48,528.00 Case fact p3 Case fact p3
40,719.37
127,592.33
29,346.24
98,246.09

ed tax rate was 23 per cent.

0.7145469852 0.713176368

0.1481357835 0.1680849928
#DIV/0!
#DIV/0!
0.0115443048 0.0200189294
0.0642774891 0.0706346127
179976.9695 179976.9695
#DIV/0!
#DIV/0!
Exhibit 2
STATEMENTS OF RETAINED EARNINGS
(for years ending January 31)
2004 2005 2006
Beginning retained earnings 0.00 (56,600.00) (76,350.00)
Add: net income (56,600.00) (19,750.00) 57,890.00
Less: dividends 0.00 0.00 0.00
Ending retained earnings (56,600.00) (76,350.00) (18,460.00)
 2007 2008 Assumptions 2007 Assumptions 2008
(18,460.00) 48,432.17
66,892.17 98,246.09
0.00 0.00
48,432.17 146,678.27
Exhibit 3
BALANCE SHEETS
(as at January 31)
Payables - Shorten by 5 days Payables - Lengthen by 101 days
ASSETS 2007 2008 2007 2008
Current assets:
Cash 1,420.00 1,420.00 1,420.00 1,420.00
Accounts receivable, net 458,836.28 524,384.32 458,836.28 524,384.32
Inventory 641,766.01 733,446.87 641,766.01 733,446.87
Prepaid expenses 1,740.00 1,740.00 1,740.00 1,740.00
Total current assets 1,103,762.29 1,260,991.19 1,103,762.29 1,260,991.19
0.00 0.00 0.00 0.00
Fixed assets: 0.00 0.00 0.00 0.00
Land 60,880.00 60,880.00 60,880.00 60,880.00
Automobiles 47,850.00 47,850.00 47,850.00 47,850.00
Building 322,940.00 322,940.00 322,940.00 322,940.00
Equipment 3,990.00 3,990.00 3,990.00 3,990.00
Subtotal 435,660.00 435,660.00 435,660.00 435,660.00
Less: accumulated amortization 81,188.00 193,112.00 81,188.00 193,112.00
Net fixed assets 354,472.00 242,548.00 354,472.00 242,548.00
0.00 0.00 0.00 0.00
Other assets: 0.00 0.00 0.00 0.00
Goodwill 30,000.00 30,000.00 30,000.00 30,000.00
Deferred charges 2,750.00 2,750.00 2,750.00 2,750.00
TOTAL ASSETS 1,490,984.29 1,536,289.19 1,490,984.29 1,536,289.19
0.00 0.00 0.00 0.00
LIABILITIES 0 0
Current liabilities: 0 0
Accounts payable 300901.8101 343887.7829 552565.1421 631503.0196
Other current liabilities 35,850.00 35,850.00 35,850.00 35,850.00
Line of Credit 442,398.31 483,595.14 190,734.98 195,979.91
Total current liabilities 779150.1201 863332.9229 779150.1190992 863332.9256407
0 0
Long-term liabilities: Bank loan1 51,300.00 26,100.00 51,300.00 26,100.00
Transport loan2 0.00 0.00 0.00 0.00
Mortgage payable3 176,510.00 176,510.00 176,510.00 176,510.00
CCB mortgage payable 335,592.00 223,668.00 335,592.00 223,668.00
Total long-term liabilities 563,402.00 426,278.00 563,402.00 426,278.00
0 0
Equity: 0 0
Common stock 100,000.00 100,000.00 100,000.00 100,000.00
Retained earnings 48,432.17 146,678.27 48,432.17 146,678.27
Total equity 148,432.17 246,678.27 148,432.17 246,678.27
TOTAL LIABILITIES & EQUITY 1,490,984.29 1,536,289.19 1,490,984.29 1,536,289.19
Balance (0.00) 0.00 0.00 0.00

1 Unsecured loan owed to the Provincial Bank of Commerce.

2 Balance owing on a truck purchased in 2001. Loan was repaid in April 2006.
3 Loan from previous owner, secured by Inventory, incurred in February 2003 as part of the purchase agreement.
Inventory - Decrease by 42 days Inventory - Increase by 5 daysReceivables - Decrease by 31 days
2007 2008 2007 2008 2007 2008

1,420.00 1,420.00 1,420.00 1,420.00 1,420.00 1,420.00

458,836.28 524,384.32 458,836.28 524,384.32 237808.2192 271780.8219
415,791.59 475,190.39 672,925.87 769,058.13 641,766.01 733,446.87
1,740.00 1,740.00 1,740.00 1,740.00 1,740.00 1,740.00
877,787.87 1,002,734.71 1,134,922.15 1,296,602.45 882,734.23 1,008,387.69
0.00 0.00
0.00 0.00
60,880.00 60,880.00 60,880.00 60,880.00 60,880.00 60,880.00
47,850.00 47,850.00 47,850.00 47,850.00 47,850.00 47,850.00
322,940.00 322,940.00 322,940.00 322,940.00 322,940.00 322,940.00
3,990.00 3,990.00 3,990.00 3,990.00 3,990.00 3,990.00
435,660.00 435,660.00 435,660.00 435,660.00 435,660.00 435,660.00
81,188.00 193,112.00 81,188.00 193,112.00 81,188.00 193,112.00
354,472.00 242,548.00 354,472.00 242,548.00 354,472.00 242,548.00
0.00 0.00
0.00 0.00
30,000.00 30,000.00 30,000.00 30,000.00 30,000.00 30,000.00
2,750.00 2,750.00 2,750.00 2,750.00 2,750.00 2,750.00
1,265,009.87 1,278,032.71 1,522,144.15 1,571,900.45 1,269,956.23 1,283,685.69
0.00 0.00
0.00 0.00
0.00 0.00
328256.5201 375150.3086 328,256.52 375,150.31 328,256.52 375,150.31
35,850.00 35,850.00 35,850.00 35,850.00 35,850.00 35,850.00
189,069.18 194,076.14 446,203.45 487,943.88 194,015.54 199,729.12
553,175.70 605,076.45 810,309.97 898,944.19 558,122.06 610,729.43
0.00 0.00
51,300.00 26,100.00 51,300.00 26,100.00 51,300.00 26,100.00
0.00 0.00 0.00 0.00 0.00 0.00
176,510.00 176,510.00 176,510.00 176,510.00 176,510.00 176,510.00
335,592.00 223,668.00 335,592.00 223,668.00 335,592.00 223,668.00
563,402.00 426,278.00 563,402.00 426,278.00 563,402.00 426,278.00
0.00 0.00
0.00 0.00
 100,000.00 100,000.00 100,000.00 100,000.00 100,000.00 100,000.00
48,432.17 146,678.27 48,432.17 146,678.27 48,432.17 146,678.27
148,432.17 246,678.27 148,432.17 246,678.27 148,432.17 246,678.27
1,265,009.87 1,278,032.71 1,522,144.14 1,571,900.45 1,269,956.23 1,283,685.69
(0.00) (0.00) 0.00 (0.00) 0.00 0.00

purchase agreement.
Receivables - Increase by 5 days
2007 2008

1,420.00 1,420.00
498630.137 569863.0137
641,766.01 733,446.87
1,740.00 1,740.00
1,143,556.15 1,306,469.89
0.00 0.00
0.00 0.00
60,880.00 60,880.00
47,850.00 47,850.00
322,940.00 322,940.00
3,990.00 3,990.00
435,660.00 435,660.00
81,188.00 193,112.00
354,472.00 242,548.00
0.00 0.00
0.00 0.00
30,000.00 30,000.00
2,750.00 2,750.00
1,530,778.15 1,581,767.89
0.00 0.00
0.00 0.00
0.00 0.00
328,256.52 375,150.31
35,850.00 35,850.00
454,837.46 497,811.31
818,943.98 908,811.62
0.00 0.00
51,300.00 26,100.00
0.00 0.00
176,510.00 176,510.00
335,592.00 223,668.00
563,402.00 426,278.00
0.00 0.00
0.00 0.00
 100,000.00 100,000.00
48,432.17 146,678.27
148,432.17 246,678.27
1,530,778.15 1,581,767.88
(0.00) 0.00
 2004 2005 2006 2007
PROFITABILITY
Net sales 100.00% 100.00% 100.00% 100.00%
Cost of Goods Sold 69.26% 73.24% 71.45% 71.32%
Gross Profit 30.74% 26.76% 28.55% 28.68%
Operating Expenses
Wages and commissions 19.74% 15.87% 14.81% 14.81%
Rent 2.09% 1.39% 0.54% 0.00%
Provision, doubtful accounts 0.72% 0.00% 0.00% 0.00%
General selling expenses 3.13% 1.72% 1.15% 1.15%
General & admin expenses 8.22% 6.55% 6.43% 6.43%
Amortization 0.00% 0.64% 1.18% 1.66%
Total Operating Expenses 33.90% 26.17% 24.11% 24.06%
Interest Expenses 2.93% 1.83% 1.63% 0.86%
Net income (loss) -6.09% -1.23% 2.80% 2.39%
Return on average equity

LIQUIDITY
Current Ratio 2.63 1.86 1.52 1.42
Acid Test 1.07 0.72 0.63 0.59
Working Capital $326,130.00 $261,690.00 $278,130.00 $324,612.17

EFFICIENCY
Age of receivables 50 46 60 60
Age of inventory 175 107 117 117
Age of payables 105 91 124 60
CCC 121 62 53 117
STABILITY
Net worth of total assets 7.26% 3.80% 7.76% 9.96%
Interest coverage - 0.3 X 2.7 X

GROWTH 2004-05 2005-06 2006-07 2007-08

Sales 72.01% 29.18% 35.47% 14.29%
Net Income -65.11% -393.11% 15.55% 46.87%
Total Assets 4.13% 68.80% 41.97% 3.04%
Equity -45.51% 244.78% 82.04% 66.19%
 2006 selected
2008 Assumptions 2007 Assumptions 2008 industry ratios
(where available)
100.00% 100%
71.32% 67.90%
28.68% 32%

14.81%
0.00%
0.00%
1.15%
6.43%
3.50%
25.89%
1.52%
3.07% 2.80%
12.30%

1.46 1.8
0.61 0.6
$397,658.26

60 52.4
117
60
117

16.06% 48.07%
3.6 X
Exhibit 5
STATEMENT OF CASH FLOWS
(for years ending January 31)

OPERATIONS 2005 2006 2007 2008

Net income (19,750.00) 57,890.00 66,892.17 98,246.09
Adjustments to cash basis:
Amortization 10,300.00 24,360.00 46,528.00 111,924.00
Accounts receivable, net (73,170.00) (137,020.00) (120,146.28) (65,548.04)
Inventory (33,100.00) (132,550.00) (167,136.01) (91,680.86)
Prepaid expenses 0.00 1,280.00 0.00 0.00
Accounts payable 106,100.00 211,760.00 (174,243.48) 46,893.79
Other current liabilities (3,940.00) 24,000.00 0.00 0.00
Net cash flow from operations (13,560.00) 49,720.00 (348,105.60) 99,834.98

FINANCING ACTIVITIES
Bank loan (25,200.00) (25,200.00) (25,200.00) (25,200.00)
Transport loan (12,510.00) (12,520.00) (5,210.00) 0.00
Mortgage payable (20,000.00) 0.00 0.00 0.00
CCB mortgage payable 0.00 172,120.00 163,472.00 (111,924.00)
Line of Credit 0.00 0.00 415,043.60 37,289.02
Net cash flow from financing (57,710.00) 134,400.00 548,105.60 (99,834.98)

INVESTING ACTIVITIES
Fixed assets 0.00 (201,310.00) (200,000.00) 0.00
Deferred charges 2,720.00 1,100.00 0.00 0.00
Net cash flow from investing 2,720.00 (200,210.00) (200,000.00) 0.00
Net cash flow (68,550.00) (16,090.00) 0.00 0.00
Beginning cash 86,060.00 17,510.00 1,420.00 1,420.00
Ending cash 17,510.00 1,420.00 1,420.00 1,420.00