Assume that the percentage changes experienced in fiscal year 2015 as compared with fiscal year 2014 for sales and cost of goods sold will be repeated in each of the next 2 years. Is Bradburn's desire to finance the plant expansion from internally generated funds realistic? Discuss.

   

P24-3 (Ratio Computations and Additional Analysis) Bradbum Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2014 Daniel Brown approached th Topeka National Bank, asking for a 24-month extension on two June 30, 2015, and September 30, 2015. Another note of expects no difficulty in paying this note on its due date. Brown explained that Bradburn's cash flow problems are due primarily to the company's desire to finance a 2 fiscal years through internally generated funds. 15% Jof $35,000 is due on March 31, 2016, but he notes, which are due $6.000 $300,000 plant expansion over the next The commercial loan officer of Topeka National Bank requested financial reports for the last 2 fiscal years. BRADBURN CORPORATION Statement of Financial Position March 31 Assets Cash Notes receivable Accounts receivable (net) Inventories (at cost) Plant & equipment (net of depreciation) Total assets 2015 $18,200 148,000 131,800 105,000 1,449,000 $1.852,000 2014 $12,500 132,000 125,500 50,000 1,420,500 $1.740,500 Liabilities and Stockholders' Equity Accounts payable Notes payable Accrued liabilities Common stock (130,000 shares, $10 par) Retained earnings" Total liabilities and stockholders' equity *Cash dividends were paid at the rate of $1 per share in fiscal year 2014 and $2 per share in fiscal year 2015. $79.000 76,000 9.000 1,300,000 388,000 $1,852.000 $91.000 61,500 6,000 1,300,000 282,000 $1,740,500 BRADBURN CORPORATION Income Statement For The Fiscal Year Ended March 31 2015 2014 Sales Cost of goods sold Gross margin Operating expenses Income before income taxes Income taxes Net income after income taxes Depreciation charges on the plant and equipment of for the fiscal years ended March 31, 2014, and 2015, respectively, are included in cost of goods sold. $3,000,000 1,530,000 1,470,000 860,000 610,000 244,000 $366,000 $2,700,000 1,425,000 1,275,000 780,000 495,000 198,000 $297,000 $102,500 $100,000 and