d. The recession is expected to continue with a 20% drop in sales in 2003 Forecast the 2003 income statements for each company.

e. Comment briefly on the impact of operating and financing leverage on the 2001 to 2003 financial performance of the two firms 21. [Extension of Problem 4-20]

a. For Company C or L., recreate the balance sheet for 2001 and 2002. The balance sheet will have the following components: Assets Cash Liabilities Accounts receivable Inventery Property, plant, and equipment Less accumulated depreciation Accounts payable Short-term debt Long-term debi Shareholders' equity

b. For the same company selected. forecast the balance sheet and cash from operations for 2003. (Hint. Use the ratios to make the required assumptions regarding levels of invento- nes, payables, and receivables.)

c. Assess the strength of the cash position and cash flows of the company analyzed.