April-June 1986 Current Assets Cash Receivables,net Inventories Prepaid Expenses

July-Sept 1986

100 507 2808 241

100 4580 1690 294

Total current assets Fixed Assets Plant, property, and equipment

3656

6664

3570

3808

Less Accumulated Depreciation Net fixed assets Other Assets Total Assets

1398 2172 201 6029

1564 2244 247 9155

Liabilities Accounts Payable 1849 1717

Notes Payable - bank

2176

3727

Income tax payable

Current installment - long-term debt

980

1060

Total current liability

5005

6504

Long Term Debt Term Loan Total Liability

5005

6504

Stockholder's Equity Common Stock Additional capital Retained Earnings 1249 105 -330 1249 105 1297

Total stockholder's Equity

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

70% of Inventory 1965600 1183000 816200 1308300

80% of Acct Receivables 507000 3664000 3791200 1392800

For the First Quarter:70% of inventory = $1,965,600.

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

Total current assets

3,656

6,664

Fixed Assets Plant, property, and equipment 3570 3808

Less accumulated depreciation and amortization

1398

1564

Total net fixed assets

2172

2244

Other assets Total Assets

201 6,029

247 9,155

Liabilities Accounts payable Notes payable banks 1,849 2176 1,717 3727

Income taxes payable

Current installments long-term debt

980

1,060

Total current liabilities

5005

6504

Long-term debt

Term loan Notes payable to banks

0 0

0 0

Total Stockholders' Equity:

Common stock Additional paid-in capital

1,249 105

1,249 105

Retained earnings (deficit)

-330

1297

Total stockholders' equity

1024

2651

Total Liabilities & Equities

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

5,420 1,331 $3,680

5,517 1,363 $4,650

Monthly distribution of 3rd quarter of FY 1987 using exhibit 5 931700 Oct 954100 Nov 816200 Dec

4336000 4413600 3791200

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

100 4739 1166 198

100 1741 1869 283

6203

3993

3987

4288

1743 2244 283 8730

1938 2350 302 6645

1755

1664

3041

1650

207

189

5003

3503

5003

3503

1249 105 2373

1249 105 1788

3727

3142

8730

6645

Quarter 3 3041

Quarter 4 1650

Total Collateral 2472600 4847000 4607400 2701100

Notes Payable Needed 2176000 3727000 3041000 1650000

Feasible Yes Yes Yes Yes

er 2 and Quarter 3.

and force company to borrow. Quarter 3 Quarter 4

100 4739 1,166 198

100 1741 1,869 283

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

4,739 1,166 $3,041

5267700 5367700 4607400

3680000 Yes 4650000 No 3041000 Yes

y the stockholder's loan on time using the bank loan.

order to repay it by November.