1. Using the information in the balance sheet for march 31, 1986 (exhibit 2), and the fiscal year 1987 budgets (exhibits 3 & 5) prepare a projected balance sheet for Hanson Ski Products for March 31, 1987. (to do this you will need to estimate the size of the commercial bank loan - Notes bank - on that date.). Does your balance sheet tell you whether or not the plans on which the budgets are based are feasible?

2. Project the size of the commercial bank loan at the end of each quarter of FY 1987 and prepare quarterly balance sheets for Hanson Ski Products for June 30, 1986, Sept 30 1986, and Dec 31, 1986.

Exhibit 1 Hanson Ski Products, Income Statements ($000) FY 1984 FY 1985 FY 1986 Net Sales 5753 7671 $9,776 Cost of Goods Sold 3040 4140 5,177 Gross Margin 2713 3531 $4,599 Selling, General & Admin 1585 2109 2,519 Product Development 152 189 260 Operating Earnings 976 Interest Expense 436 428 507 Income before Tax & Extra Item 540 Tax Provision 314 468 400 Earnings before Extra item 226 Extra Item Tax Benefit from Utilization 314 468 251 Net Earnings 540 805 $1,164 1233 $1,820 805 $1,313 337 $913 Earnings per common share: Earnings before extra items 0.39 Extra Items 0.53 0.79 0.41 Net Earnings 0.92 1.36 1.91 585,889 590,566 607,761 Weighted Average # of Common Shares out 0.57 1.50 aDepreciation and amortization for 1984, 1985, and 1986 was $341, $396, and $561, respectively. Exhibit 2 Hanson Ski Products, Consolidated Balance Sheets ($000) 3/31/84 3/31/85 3/31/86 Current Assets Cash 163 81 156 Receivables, net 692 1378 1556 Inventories 1352 2104 1729 Prepaid expenses 99 124 262 Total current assets 2306 3678 3703 Fixed Assets Plant, property, and equipment Less accumulated depreciation and amortization 1430 1958 3393 569 836 1255 Total net fixed assets 861 Other assets 171 191 207 Total Assets 3338 1122 5000 2138 6048 Liabilities Accounts payable Notes payablebanks Income taxes payable Current installmentslongterm debt 536 967 1586 1100 2082 1547 149 109 35 1010 Total current liabilities 1745 3084 4292 Term loan 1423 1407 Notes payable to banks 506 Longterm debt Total 1929 1407 Common stock Additional paidin capital 1126 105 1166 105 1249 105 Retained earnings (deficit) (1567) (762) 402 Total stockholders' equity (336) 509 1756 Total Equities 3338 5000 6048 Stockholders' Equity: Borrowings under the revolving line of credit were personally guaranteed by the major stockholders and were secured by all of the accounts receivable, inventories, machinery and equipment, furniture, trademarks, and patent rights. b Current installments on longterm debt (3/31/86): Officers and stockholders Installment purchases Capital leases $841,000 169,000 $1,010,000 Exhibit 3 FY 1987 Final Budget (June 15, 1986$000) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter AprilJune 1986 July Sept 1986 OctDec 1986 JanMarch 1987 Total Net revenues $391 5893 4769 832 11885 Cost of Goods Sold 344 2630 2176 491 5641 Gross Margin $47 3263 Operating Expenses 779 1204 1256 926 4165 Operating income $(732) 2059 Tax Allowance 432 261 693 Net Income (loss) $(732) 1627 1076 (585) 1386 2593 1337 341 (585) 6244 2079 Hanson Ski Products 187038 Exhibit 5 Third Quarter FY 1987 Cash Budget by Months ($000) October November December Cash receipts $1,000 $1,054 $2,518 Cash outflow For materials, labor, and operating expenses 830 1,065 803 Interest 54 56 58 Capital expenditures 69 62 48 Pay back stockholder loans 841 Collateral for bank loans at end of month Receivables 5,420 5517 4739 1,331 1363 1166 (except for interest) Inventory FY 1987 Cash Budget and Selected Expense and Balance Sheet Items (June 15, 1986; $000) Q1 Q2 Q3 Q4 AprilJune 1986 JulySept 1986 OctDec 1986 JanMarch 1987 Cash receipts 1487 1764 4572 3800 (except for interest but including Income tax) 1928 2967 2698 2022 Interest 67 110 168 86 Capital expenditures for fixed assets 177 238 179 301 Pay back stockholder loans 841 Depreciation 143 166 179 195 Planned cash balance 100 100 100 100 Receivables net 507 4580 4739 1741 Inventories 2808 1690 1166 1869 Prepaid Expenses 241 294 198 283 Other Assets 201 247 283 301 1849 980 1717 1060 1755 207 1664 189 Cash outflows For materials, labor, and operating expenses Assets at end of Quarter Liabilities at end of quarter Accounts payable Income taxes payable Current installments longterm debt Notes payablebanks (to be determined)