Ch.1-AnIntroductiontoFinancialManagement

2002,PrenticeHall,Inc.GoaloftheFirm1)ProfitMaximization?thisgoalignores:a)TIMINGofReturns(TimeValueofMoney-Ch.5)b)UNCERTAINTYofReturns(Risk-Ch.6)GoaloftheFirm2)ShareholderWealthMaximization?thisisthesameas:a)MaximizingFirmValueb)MaximizingStockPriceLegalFormsofBusiness1)SoleProprietorship

Abusinessownedbyasingleindividual.Ownermaintainstitletothefirm’sassets.Ownerhasunlimitedliability.2)PartnershipSimilartoasoleproprietorship,exceptthattherearetwoormoreowners.2a)GeneralPartnership

Allpartnershaveunlimitedliability.2b)LimitedPartnershipConsistsofoneormoregeneralpartners,whohaveunlimitedliability,andOneormorelimitedpartners(investors)whoseliabilityislimitedtotheamountoftheirinvestmentinthebusiness.LegalFormsofBusiness3)Corporation

Abusinessentitythatlegallyfunctionsseparateandapartfromitsowners.Owners’liabilityislimitedtotheamountoftheirinvestmentinthefirm.Ownersholdcommonstockcertificates,andownershipcanbetransferredbysellingthecertificates.LegalFormsofBusinessTheCorporationandFinancialMarketsTheCorporationandFinancialMarketsCorporationTheCorporationandFinancialMarketsCorporationInvestorsTheCorporationandFinancialMarketsGovernmentCorporationInvestorsTheCorporationandFinancialMarketscashGovernmentCorporationInvestorsTheCorporationandFinancialMarketscashGovernmentsecuritiesCorporationInvestorsTheCorporationandFinancialMarketsGovernmentcashsecuritiesCorporationInvestorsSecondarymarketsTheCorporationandFinancialMarketsGovernmentcashsecuritiesCorporationInvestorsSecondarymarketsTheCorporationandFinancialMarketsGovernmentcashsecuritiesCorporationInvestorsSecondarymarketsTheCorporationandFinancialMarketscashInvestorsSecondarymarketsGovernmentsecuritiesCashflowCorporationTheCorporationandFinancialMarketscashInvestorsSecondarymarketsGovernmentsecuritiesCashflowtaxCorporationTheCorporationandFinancialMarketscashInvestorsSecondarymarketsGovernmentsecuritiesCashflowreinvesttaxCorporationTheCorporationandFinancialMarketscashInvestorsSecondarymarketsGovernmentsecuritiesCashflowreinvesttaxCorporationdividends,etc.TheCorporationandFinancialMarketsPrimaryMarketPrimaryMarketMarketinwhichnewissuesofasecurityaresoldtoinitialbuyers.TheCorporationandFinancialMarketsPrimaryMarketMarketinwhichnewissuesofasecurityaresoldtoinitialbuyers.SecondaryMarketTheCorporationandFinancialMarketsPrimaryMarketMarketinwhichnewissuesofasecurityaresoldtoinitialbuyers.SecondaryMarketMarketinwhichpreviouslyissuedsecuritiesaretraded.TheCorporationandFinancialMarketsInitialPublicOffering(IPO)TheCorporationandFinancialMarketsInitialPublicOffering(IPO)Thefirsttimethefirm’sstockissoldtothegeneralpublic.TheCorporationandFinancialMarketsInitialPublicOffering(IPO)Thefirsttimethefirm’sstockissoldtothegeneralpublic.SeasonedNewIssueTheCorporationandFinancialMarketsInitialPublicOffering(IPO)Thefirsttimethefirm’sstockissoldtothegeneralpublic.SeasonedNewIssueAnewstockofferingbyafirmthatalreadyhasstockthatistradedinthesecondarymarket.TheCorporationandFinancialMarketsFinancialManagementAxioms1)Risk-returntrade-off2)Timevalueofmoney3)Cash-notprofits-isking4)Incrementalcashflowscount5)Thecurseofcompetitivemarkets6)Efficientcapitalmarkets7)Theagencyproblem8)Taxesbiasbusinessdecisions9)Allriskisnotequal10)EthicaldilemmasareeverywhereinfinanceCh.2-UnderstandingFinancialStatements,Taxes,andCashFlows2002,PrenticeHall,Inc.SALES-EXPENSES=PROFITIncomeStatementSALES-EXPENSES=PROFITIncomeStatementRevenueIncomeStatementSALES-EXPENSES=PROFIT

IncomeStatementSALES-EXPENSES=PROFITCostofGoodsSoldIncomeStatementSALES-EXPENSES=PROFITCostofGoodsSoldOperatingExpensesIncomeStatementSALES-EXPENSES=PROFITCostofGoodsSoldOperatingExpenses(marketing,administrative)IncomeStatementSALES-EXPENSES=PROFITCostofGoodsSoldOperatingExpenses(marketing,administrative)FinancingCostsIncomeStatementSALES-EXPENSES=PROFITCostofGoodsSoldOperatingExpenses(marketing,administrative)FinancingCostsTaxes

SALES-CostofGoodsSold

GROSSPROFIT-OperatingExpenses

OPERATINGINCOME(EBIT)

-InterestExpenseEARNINGSBEFORETAXES(EBT)-IncomeTaxesEARNINGSAFTERTAXES(EAT)-PreferredStockDividends-NETINCOMEAVAILABLETOCOMMONSTOCKHOLDERSIncomeStatement

SALES-CostofGoodsSoldGROSSPROFIT-OperatingExpenses

OPERATINGINCOME

(EBIT)-InterestExpenseEARNINGSBEFORETAXES(EBT)-IncomeTaxesEARNINGSAFTERTAXES(EAT)-PreferredStockDividends-NETINCOMEAVAILABLETOCOMMONSTOCKHOLDERSIncomeStatementOperatingActivities

SALES-CostofGoodsSoldGROSSPROFIT-OperatingExpenses

OPERATINGINCOME(EBIT)

-InterestExpenseEARNINGSBEFORETAXES(EBT)-IncomeTaxesEARNINGSAFTERTAXES(EAT)-PreferredStockDividends-NETINCOMEAVAILABLETOCOMMONSTOCKHOLDERSIncomeStatementFinancingActivitiesBalanceSheet

TotalAssets=OutstandingDebt+Shareholders’EquityBalanceSheetBalanceSheetAssetsBalanceSheetAssetsLiabilities(Debt)&EquityBalanceSheetAssetsLiabilities(Debt)&Equity

CurrentAssetsCashMarketableSecuritiesAccountsReceivableInventories PrepaidExpensesFixedAssetsMachinery&EquipmentBuildingsandLandOtherAssets Investments&patentsCurrentLiabilitiesAccountsPayableAccruedExpensesShort-termnotesLong-TermLiabilitiesLong-termnotesMortgagesEquityPreferredStockCommonStock(Parvalue)PaidinCapitalRetainedEarningsAssetsCurrentAssets:AssetsCurrentAssets:assetsthatarerelativelyliquid,andareexpectedtobeconvertedtocashwithinayear.AssetsCurrentAssets:assetsthatarerelativelyliquid,andareexpectedtobeconvertedtocashwithinayear.Cash,marketablesecurities,accountsreceivable,inventories,prepaidexpenses.AssetsCurrentAssets:assetsthatarerelativelyliquid,andareexpectedtobeconvertedtocashwithinayear.Cash,marketablesecurities,accountsreceivable,inventories,prepaidexpenses.FixedAssets:AssetsCurrentAssets:assetsthatarerelativelyliquid,andareexpectedtobeconvertedtocashwithinayear.Cash,marketablesecurities,accountsreceivable,inventories,prepaidexpenses.FixedAssets:machineryandequipment,buildings,andland.AssetsCurrentAssets:assetsthatarerelativelyliquid,andareexpectedtobeconvertedtocashwithinayear.Cash,marketablesecurities,accountsreceivable,inventories,prepaidexpenses.FixedAssets:machineryandequipment,buildings,andland.OtherAssets:AssetsCurrentAssets:assetsthatarerelativelyliquid,andareexpectedtobeconvertedtocashwithinayear.Cash,marketablesecurities,accountsreceivable,inventories,prepaidexpenses.FixedAssets:machineryandequipment,buildings,andland.OtherAssets:anyassetthatisnotacurrentassetorfixedasset.AssetsCurrentAssets:assetsthatarerelativelyliquid,andareexpectedtobeconvertedtocashwithinayear.Cash,marketablesecurities,accountsreceivable,inventories,prepaidexpenses.FixedAssets:machineryandequipment,buildings,andland.OtherAssets:anyassetthatisnotacurrentassetorfixedasset.Intangibleassetssuchaspatentsandcopyrights.FinancingDebtCapital:FinancingDebtCapital:financingprovidedbyacreditor.FinancingDebtCapital:financingprovidedbyacreditor.Short-termdebt:FinancingDebtCapital:financingprovidedbyacreditor.Short-termdebt:borrowedmoneythatmustberepaidwithinthenext12months.FinancingDebtCapital:financingprovidedbyacreditor.Short-termdebt:borrowedmoneythatmustberepaidwithinthenext12months.Accountspayable,otherpayablessuchasinterestortaxespayable,accruedexpenses,short-termnotes.FinancingDebtCapital:financingprovidedbyacreditor.Short-termdebt:borrowedmoneythatmustberepaidwithinthenext12months.Accountspayable,otherpayablessuchasinterestortaxespayable,accruedexpenses,short-termnotes.Long-termdebt:FinancingDebtCapital:financingprovidedbyacreditor.Short-termdebt:borrowedmoneythatmustberepaidwithinthenext12months.Accountspayable,otherpayablessuchasinterestortaxespayable,accruedexpenses,short-termnotes.Long-termdebt:loansfrombanksorothersourcesthatlendmoneyforlongerthan12months.FinancingEquityCapital:FinancingEquityCapital:shareholders’investmentinthefirm.FinancingEquityCapital:shareholders’investmentinthefirm.PreferredStockholders:FinancingEquityCapital:shareholders’investmentinthefirm.PreferredStockholders:receivefixeddividends,andhavehigherprioritythancommonstockholdersineventofliquidationofthefirm.FinancingEquityCapital:shareholders’investmentinthefirm.PreferredStockholders:receivedfixeddividends,andhavehigherprioritythancommonstockholdersineventofliquidationofthefirm.CommonStockholders:FinancingEquityCapital:shareholders’investmentinthefirm.PreferredStockholders:receivedfixeddividends,andhavehigherprioritythancommonstockholdersineventofliquidationofthefirm.CommonStockholders:residualownersofabusiness.Theyreceivewhateverisleftaftercreditorsandpreferredstockholdersarepaid.CorporateIncomeTaxRates

Since1993TaxableIncomeCorporateTaxRate$1-$50,00015%$50,001-$75,00025%$75,001-$100,000 34%$100,001-$335,00039%$335,001-$10,000,00034%$10,000,001-$15,000,000 35%$15,000,001-$18,333,333 38%over$18,333,333 35%FreeCashFlowsFreecashflow:cashflowthatisfreeandavailabletobedistributedtothefirm’sinvestors(bothdebtandequityinvestors)FreeCashFlowsFirm’sOperatingFreecashflows=Firm’sFinancingFreecashflowsCashflowsgeneratedthroughthefirm’soperationsandinvestmentsinassets=Cashflowspaidto-orreceivedby-thefirm’sinvestors(creditors&stockholders)CalculatingFreeCashFlows:

AnOperatingPerspectiveAfter-taxcashflowfromoperationslessinvestmentinnetoperatingworkingcapitallessinvestmentsinfixedandotherassetsCalculatingFreeCashFlows:

AnOperatingPerspectiveAfter-taxcashflowfromoperationslessinvestmentinnetoperatingworkingcapitallessinvestmentsinfixedandotherassetsOperatingincome+depreciation-cashtaxpaymentsCalculatingFreeCashFlows:

AnOperatingPerspectiveAfter-taxcashflowfromoperationslessinvestmentinnetoperatingworkingcapitallessinvestmentsinfixedandotherassets[Changeincurrentassets]-[changeinnon-interestbearingcurrentliabilities]CalculatingFreeCashFlows:

AnOperatingPerspectiveAfter-taxcashflowfromoperationslessinvestmentinnetoperatingworkingcapitallessinvestmentsinfixedandotherassetsChangeingrossfixedassets,andanyotherassetsthatareonthebalancesheet.CalculatingFreeCashFlows:

AFinancingPerspectiveInterestpaymentstocreditors-changeindebtprincipal-dividendspaidtostockholders-changeinstock=FinancingFreeCashFlowsTaxExample:SpaceCowComputerhassalesof$32million,costofgoodssoldat60%ofsales,cashoperatingexpensesof$2.4million,and$1.4millionindepreciationexpense.Thefirmhas$12millionin9.5%bondsoutstanding.Thefirmwillpay$500,000individendstoitscommonstockholders.Calculatethefirm’staxliability.Sales $32,000,000CostofGoodsSold (19,200,000)OperatingExpenses (2,400,000)DepreciationExpense

(1,400,000)EBITorNOI 9,000,000InterestExpense (1,140,000)TaxableIncome 7,860,000Income

taxrate

taxpayment$50,000x.15=$7,500$25,000x.25=6,250$25,000x.34=8,500$235,000x.39=91,650$7,525,000x.34=2,558,500TotalTaxpayment$2,672,400shortcut:

$7,860,000x.34=$2,672,400Ch.3-EvaluatingaFirm’sFinancialPerformance2002,PrenticeHall,Inc.FinancialStatementAnalysisAreourdecisionsmaximizingshareholderwealth?Wewillwanttoanswerquestionsaboutthefirm’sLiquidityEfficientuseofAssetsLeverage(financing)ProfitabilityWewillwanttoanswerquestionsaboutthefirm’sLiquidityEfficientuseofAssetsLeverage(financing)ProfitabilityFinancialRatiosToolsthathelpusdeterminethefinancialhealthofacompany.Wecancompareacompany’sfinancialratioswithitsratiosinpreviousyears(trendanalysis).Wecancompareacompany’sfinancialratioswiththoseofitsindustry.Example:

CyberDragonCorporationCyberDragon’sBalanceSheet($000)

Assets: Liabilities&Equity:Cash $2,540 Accountspayable 9,721

Marketablesecurities 1,800 Notespayable 8,500Accountsreceivable 18,320 Accruedtaxespayable 3,200Inventories 27,530 Othercurrentliabilities 4,102

Totalcurrentassets 50,190

Totalcurrentliabilities 25,523Plantandequipment 43,100

Long-termdebt(bonds) 22,000lessaccumdeprec. 11,400

Totalliabilities 47,523

Netplant&equip. 31,700 Commonstock($10par) 13,000Totalassets 81,890 Paidincapital 10,000 Retainedearnings 11,367

Totalstockholders'equity34,367 Totalliabilities&equity 81,890

Sales(allcredit)

$112,760

CostofGoodsSold

(85,300)

GrossProfit

27,460

OperatingExpenses: Selling (6,540) General&Administrative (9,400) TotalOperatingExpenses (15,940)

Earningsbeforeinterestandtaxes(EBIT)

11,520

Interestcharges: Interestonbanknotes: (850) Interestonbonds: (2,310) TotalInterestcharges (3,160)

Earningsbeforetaxes(EBT)

8,360

Taxes (assume40%)

(3,344)

NetIncome

5,016

CyberDragon’sIncomeStatementCyberDragon

OtherInformation

Dividendspaidoncommonstock $2,800Earningsretainedinthefirm 2,216Sharesoutstanding(000) 1,300Marketpricepershare 20Bookvaluepershare 26.44Earningspershare 3.86Dividendspershare 2.151.LiquidityRatiosDowehaveenoughliquidassetstomeetapproachingobligations?WhatisCyberDragon’sCurrentRatio?WhatisCyberDragon’sCurrentRatio?50,19025,523=1.97WhatisCyberDragon’sCurrentRatio?Iftheaveragecurrentratiofortheindustryis2.4,isthisgoodornot?50,19025,523=1.97Whatisthefirm’sAcidTestRatio?Whatisthefirm’sAcidTestRatio?50,190-27,53025,523=.89Whatisthefirm’sAcidTestRatio?Supposetheindustryaverageis.92.Whatdoesthistellus?50,190-27,53025,523=.89Whatisthefirm’sAverageCollectionPeriod?Whatisthefirm’sAverageCollectionPeriod?18,320112,760/365=59.3daysWhatisthefirm’sAverageCollectionPeriod?Iftheindustryaverageis47days,whatdoesthistellus?18,320112,760/365=59.3days2.OperatingEfficiencyRatiosMeasurehowefficientlythefirm’sassetsgenerateoperatingprofits.Whatisthefirm’sOperatingIncomeReturnonInvestment(OIROI)?Whatisthefirm’sOperatingIncomeReturnonInvestment(OIROI)?11,52081,890=14.07%Slightlybelowtheindustryaverageof15%.Whatisthefirm’sOperatingIncomeReturnonInvestment(OIROI)?11,52081,890=14.07%Slightlybelowtheindustryaverageof15%.TheOIROIreflectsproductpricingandthefirm’sabilitytokeepcostsdown.Whatisthefirm’sOperatingIncomeReturnonInvestment(OIROI)?11,52081,890=14.07%WhatistheirOperatingProfitMargin?WhatistheirOperatingProfitMargin?11,520112,760=10.22%WhatistheirOperatingProfitMargin?Thisisbelowtheindustryaverageof12%.11,520112,760=10.22%WhatistheirTotalAssetTurnover?WhatistheirTotalAssetTurnover?112,76081,890=1.38timesWhatistheirTotalAssetTurnover?Theindustryaverageis1.82times.Thefirmneedstofigureouthowtosqueezemoresalesdollarsoutofitsassets.112,76081,890=1.38timesWhatisthefirm’sAccountsReceivableTurnover?Whatisthefirm’sAccountsReceivableTurnover?112,76018,320=6.16timesWhatisthefirm’sAccountsReceivableTurnover?CyberDragonturnstheirA/Rover6.16

timesperyear.Theindustryaverageis8.2times.Isthisefficient?112,76018,320=6.16timesWhatisthefirm’sInventoryTurnover?Whatisthefirm’sInventoryTurnover?85,30027,530=3.10timesWhatisthefirm’sInventoryTurnover?CyberDragonturnstheirinventoryover3.1timesperyear.Theindustryaverageis3.9times.Isthisefficient?85,30027,530=3.10timesLowinventoryturnover:Thefirmmayhavetoomuchinventory,whichisexpensivebecause:Inventorytakesupcostlywarehousespace.Someitemsmaybecomespoiledorobsolete.Whatisthefirm’sFixedAssetTurnover?Whatisthefirm’sFixedAssetTurnover?112,76031,700=3.56timesWhatisthefirm’sFixedAssetTurnover?Iftheindustryaverageis4.6times,whatdoesthistellusaboutCyberDragon?112,76031,700=3.56times3.LeverageRatios

(financingdecisions)Measuretheimpactofusingdebtcapitaltofinanceassets.Firmsusedebttolever(increase)returnsoncommonequity.HowdoesLeveragework?Supposewehaveanallequity-financedfirmworth$100,000.Itsearningsthisyeartotal$15,000.ROE=(ignoretaxesforthisexample)HowdoesLeveragework?Supposewehaveanallequity-financedfirmworth$100,000.Itsearningsthisyeartotal$15,000.ROE==15%15,000100,000HowdoesLeveragework?Supposethesame$100,000firmisfinancedwithhalfequity,andhalf8%debt(bonds).Earningsarestill$15,000.ROE=HowdoesLeveragework?Supposethesame$100,000firmisfinancedwithhalfequity,andhalf8%debt(bonds).Earningsarestill$15,000.ROE= =15,000-4,00050,000HowdoesLeveragework?Supposethesame$100,000firmisfinancedwithhalfequity,andhalf8%debt(bonds).Earningsarestill$15,000.ROE= =22%15,000-4,00050,000WhatisCyberDragon’sDebtRatio?WhatisCyberDragon’sDebtRatio?47,52381,890=58%

WhatisCyberDragon’sDebtRatio?Iftheindustryaverageis47%,whatdoesthistellus?47,52381,890=58%WhatisCyberDragon’sDebtRatio?47,52381,890=58%Iftheindustryaverageis47%,whatdoesthistellus?Canleveragemakethefirmmoreprofitable?Canleveragemakethefirmriskier?Whatisthefirm’sTimesInterestEarnedRatio?Whatisthefirm’sTimesInterestEarnedRatio?11,5203,160=3.65timesWhatisthefirm’sTimesInterestEarnedRatio?Theindustryaverageis6.7times.Thisisfurtherevidencethatthefirmusesmoredebtfinancingthanaverage.11,5203,160=3.65times4.ReturnonEquityHowwellarethefirm’smanagersmaximizingshareholderwealth?WhatisCyberDragon’s

ReturnonEquity(ROE)?WhatisCyberDragon’s

ReturnonEquity(ROE)?5,01634,367=14.6%WhatisCyberDragon’s

ReturnonEquity(ROE)?Theindustryaverageis17.54%.5,01634,367=14.6%WhatisCyberDragon’s

ReturnonEquity(ROE)?5,01634,367=14.6%Theindustryaverageis17.54%.Isthiswhatwewouldexpect,giventhefirm’sleverage?Conclusion:EventhoughCyberDragonhashigherleveragethantheindustryaverage,theyaremuchlessefficient,andtherefore,lessprofitable.TheDuPontModelBringstogether:ProfitabilityEfficiencyLeverage

NetProfitTotalAssetDebtMarginTurnoverRatioROE=x/(1-)TheDuPontModel

NetProfitTotalAssetDebtMarginTurnoverRatio

NetIncome

Sales

TotalDebtSalesTotalAssetsTotalAssets

ROE=x/(1-)=x/(1-)

TheDuPontModel

NetProfitTotalAssetDebtMarginTurnoverRatio

NetIncome

Sales

TotalDebtSalesTotalAssetsTotalAssets

5,016

112,760

47,523112,76081,89081,890ROE=x/(1-)=x/(1-)=x/(1-)

TheDuPontModelROE=x/(1-)=x/(1-)=x/(1-)

=14.6%

NetProfitTotalAssetDebtMarginTurnoverRatio

NetIncome

Sales

TotalDebtSalesTotalAssetsTotalAssets

5,016

112,760

47,523112,76081,89081,890TheDuPontModelCh.4:FinancialForecasting,

Planning,andBudgeting2002,PrenticeHall,Inc.FinancialForecasting1)Projectsalesrevenuesandexpenses.FinancialForecasting1)Projectsalesrevenuesandexpenses.2)Estimatecurrentassetsandfixedassetsnecessarytosupportprojectedsales.FinancialForecasting1)Projectsalesrevenuesandexpenses.2)Estimatecurrentassetsandfixedassetsnecessarytosupportprojectedsales.PercentofsalesforecastPercentofSalesMethodSupposethisyear’ssaleswilltotal$32million.Nextyear,weforecastsalesof$40million.Netincomeshouldbe5%ofsales.Dividendsshouldbe50%ofearnings. Thisyear

%of$32mAssetsCurrentAssets $8m 25%FixedAssets $16m 50%TotalAssets $24mLiab.andEquityAccountsPayable $4m 12.5%AccruedExpenses $4m 12.5%NotesPayable $1m n/aLongTermDebt $6m n/aTotalLiabilities $15mCommonStock $7m n/aRetainedEarnings $2m Equity $9mTotalLiab.&Equity $24m Nextyear

%of$40mAssetsCurrentAssets 25%FixedAssets 50%TotalAssets Liab.andEquityAccountsPayable 12.5%AccruedExpenses 12.5%NotesPayable n/aLongTermDebt n/aTotalLiabilities CommonStock n/aRetainedEarnings Equity TotalLiab.&Equity

Nextyear

%of$40mAssetsCurrentAssets $10m 25%FixedAssets 50%TotalAssets Liab.andEquityAccountsPayable 12.5%AccruedExpenses 12.5%NotesPayable n/aLongTermDebt n/aTotalLiabilities CommonStock n/aRetainedEarnings Equity TotalLiab.&Equity

Nextyear

%of$40mAssetsCurrentAssets $10m 25%FixedAssets $20m 50%TotalAssets Liab.andEquityAccountsPayable 12.5%AccruedExpenses 12.5%NotesPayable n/aLongTermDebt n/aTotalLiabilities CommonStock n/aRetainedEarnings Equity TotalLiab.&Equity

Nextyear

%of$40mAssetsCurrentAssets $10m 25%FixedAssets $20m 50%TotalAssets $30mLiab.andEquityAccountsPayable 12.5%AccruedExpenses 12.5%NotesPayable n/aLongTermDebt n/aTotalLiabilities CommonStock n/aRetainedEarnings Equity TotalLiab.&Equity

Nextyear

%of$40mAssetsCurrentAssets $10m 25%FixedAssets $20m 50%TotalAssets $30mLiab.andEquityAccountsPayable $5m 12.5%AccruedExpenses 12.5%NotesPayable n/aLongTermDebt n/aTotalLiabilities CommonStock n/aRetainedEarnings Equity TotalLiab.&Equity

Nextyear

%of$40mAssetsCurrentAssets $10m 25%FixedAssets $20m 50%TotalAssets $30mLiab.andEquityAccountsPayable $5m 12.5%AccruedExpenses $5m 12.5%NotesPayable n/aLongTermDebt n/aTotalLiabilities CommonStock n/aRetainedEarnings Equity TotalLiab.&Equity

Nextyear

%of$40mAssetsCurrentAssets $10m 25%FixedAssets $20m 50%TotalAssets $30mLiab.andEquityAccountsPayable $5m 12.5%AccruedExpenses $5m 12.5%NotesPayable $1m n/aLongTermDebt n/aTotalLiabilities CommonStock n/aRetainedEarnings Equity TotalLiab.&Equity

Nextyear

%of$40mAssetsCurrentAssets $10m 25%FixedAssets $20m 50%TotalAssets $30mLiab.andEquityAccountsPayable $5m 12.5%AccruedExpenses $5m 12.5%NotesPayable $1m n/aLongTermDebt $6m n/aTotalLiabilities CommonStock n/aRetainedEar