Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, 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, 2018, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two notes which are due June 30, 2018, and September 30, 2018. Another note is due on March 31, 2019, but he expects no difficulty in paying this note on its due date. Brown explained that Bradburns cash flow problems are due primarily to the companys desire to finance a plant expansion over the next 2 fiscal years through internally generated funds. Additional information follows:

P24-3 (LO6,8) Ratio Computations and Additional Analysis Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, was one ofthe organizers of Bradburn and is its current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10,2018, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two notes which are due June 30, 2018, and September 30,2018. Another note is due on March 31,2019, but he 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 plant expansion over the next 2 fiscal years through internally generated funds. Additional information follows: Common stock owned by Daniel Brown 15% Amount of the two notes requiring a 24-month extension (each) 35,000 Amount ofnote due on March 31, 2019 6,000 Plant expansion cost 300,000 The commercial loan officer of Top eka National Bank requested financial reports for the last 2 fiscal years. BRADBURN CORPORATION Statement of Financial Position March 31 Assets 2018 2017 Cash 18,200 $ 12,500 148,000 Notes receivable 132,000 Accounts receivable (net) 131,800 125,500 Inventories (at cost) 105,000 1,449,000 50,000 Plant & equipment (net of depreciation) 1,420,500 Total assets 1,740,500 1,852,000 $ Liabilities and Stockholders' Equity Accounts payable Notes payable $ 79,000 $ 91,000 76,000 61,500 Accrued liabilities 9,000 6,000 Common stock 1,300,000 1,300,000 Retained earnings Total liabilities and stockholders' equity 388,000 282,000 $ 1,740,500 1,852,000 $ BRADBURN CORPORATION Income Statement For The Fiscal Year Ended March 31 2018 2017 3,000,000$ Sales 2,700,000 Cost of goods sold 1,530,000 1,425,000 Gross margin Operating expenses 1,470,000 1,275,000 860,000 780,000 Income before income taxes 495,000 610,000 198,000 Income taxes 244,000 297,000 Net income $ S 366,000 Additional information follows 130,000 Number of shares outstanding of common stock $ Par value of common stock per share 10.00 Cash dividends paid per share during: 2017 1.00 2018 2.00 on the plant and equipment Depreciation charges included in cost of goods sold: Fiscal year ending March 31,2017 Fiscal year ending March 31,2018 $ 100,000 102,500 Instructions: (a) Compute the following items for Bradburn Corporation: (1) Current ratio for fiscal years 2017 and 2018. 2017 320,000 = 2.02 :1 158,500 $ 403,000 2018 2.46 :1 164,000 (2) Acid-test (quick) ratio for fiscal years 2017 and 2018 2017 $ 270,000 1.70 :1 158,500 2018 298,000 1.82 :1 164,000 (3) Inventory turnover for fiscal year 2018 2018 1,530,000 19.74 times $ 77,500 (4) Return on assets for fiscal years 2017 and 2018. Total assets at 3/31/16: 1,688,500 2017 297,000 17.32% $ 1,714,500 366,000 2018 = 20.38% 1,796,250 (5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2017 to 2018 Percent Change 2018 2017 Change 3,000,000 $ 300,000 Sales S 2,700,000 $ 11.11% Cost of goods sold Gross margin 1,530,000 1,425,000 $ 105,000 7.37% 1,275,000 $ 1,470,000 $ 195,000 15.29% 366,000 $ 297,000 $ 23.23% Net income 69,000 Identify and explain what other financial reports and/or financial analyses might be helpful to the commercial (b) loan officer of Topeka National Bank in evaluating Daniel Brown's request for a time extension on Bradburn's notes Assume that the percentage changes experienced in fiscal year 2018 as compared with fiscal year 2017 for sales, (c) cost of goods sold, and operating expenses will be repeated in each ofthe next 2 years. Is Bradbun's desire to finance the plant expansion from internally generated funds realistic? Discuss. 2018 2019 2020 3,000,000 $ 1,530,000 1,470,000 Sales $ 3,333,333 3,703,704 Cost of goods sold Gross margin 1,642,737 $ 1,763,781 1,690,596 1,939,923 Operating expenses 860,000 948,205.13 1,045,457 Income before 6 742,391 894 xes Income taxes (40%) 357,786 244,000 296,957 $ Net income 366,000 445,435 536,680 Add: Depreciation 102,500 102,500 Deduct: Dividends (260,000) (260,000) Note repayment 6,000 Funds for plant expansion Plant expansion (150,000) (150,000) Excess funds