Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is the current president. The company has been successful, but it currently is experiencing a shortage of funds. On June 10, 2014, Daniel Brown approached the Topeka National Bank, asking for a 24-month extension on two $35,000 notes, which are due on June 30, 2015, and September 30, 2015. Another note of $6,000 is due on March 31, 2016, but the company anticipates 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 $300,000 plant expansion over the next 2 fiscal years through internally generated funds. The commercial loan officer of Topeka National Bank requested the financial reports (balance sheet and income statement) for the last 2 fiscal years. See the Excel template for these reports. Using this Excel template, provide the following information. Be sure to include formulas for the cells that are labeled formulas. Be sure all amounts are linked to the proper cells: 1. Compute the following items for Bradburn Corporation: 1. Current ratio for fiscal years 2014 and 2015 2. Acid-test (quick) ratio for fiscal years 2014 and 2015 3. Inventory turnover for fiscal year 2015. 4. Return on assets for fiscal years 2014 and 2015. (Assume total assets were $1,688,500 at 3/31/13.) 5. Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2014 to 2015 2. Identify and explain what other financial reports and/or financial analyses might be helpful to the commercial loan officer of Topeka National Bank in evaluating Daniel Brown's request for a time extension on Bradburn's notes. 3. 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. 4. Should Topeka National Bank grant the extension on Bradburn's notes considering Daniel Brown's statement about financing the plant expansion through internally generated funds? Discuss. |(Ratio Computations and Additional Analysis) Bradburn 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 the 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% of the $35,000 is due on March 31, 2016, but he notes, which are due on $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 2015 2014 $18,200 Cash $12,500 Notes receivable 148,000 132,000 125,500 Accounts receivable (net) Inventories (at cost) Plant & equipment (net of depreciation) 131,800 105,000 50,000 1,449,000 $1,852,000 1,420,500 $1,740,500 Total assets Liabilities and Stockholders' Equity Accounts payable $79,000 $91,000 Notes payable 76,000 61,500 Accrued liabilities 9,000 1,300,000 6,000 Common stock (130,000 shares, $10 par) 1,300,000 Retained earnings 282,000 388,000 Total liabilities and stockholders' equity $1,740,500 $1,852,000 Cash dividends were paid at the rate of $1 per share in fiscal year 2014 and $2 per share in fiscal year 2015. BRADBURN CORPORATION Income Statement For The Fiscal Year Ended March 31 2015 2014 $3,000,000 $2,700,000 Sales Cost of goods sold Gross margin Operating expenses 1,530,000 1,425,000 1,470,000 1,275,000 00 780,0 Income before income taxes 610,000 244,000 495,000 Income taxes 198,000 Net income after income taxes $366,000 $297,000 $100,000 $102,500 Depreciation charges on the plant and equipment of and for the fiscal years ended March 31, 2014, and 2015, respectively, are included in cost of goods sold. Instructions: Fill in the provided matrix and utilize it as the matrix for "VLOOKUP" formulas within the cells below. Column 4 Column 5 2015 2014 Average inventory - 2015 |Average total assets Total Assets = Mar 31, 2013 Total Assets = Mar 31, 2014 Total Assets = Mar 31, 2015 Cost of goods sold Current assets Current liabilities Dividends Depreciation Gross margin Income before taxes Formula Formula Formula Formula Formula Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount Amount Income taxes (40%) Inventories = EOY 2014 Inventories= EOY 2015 Net income after taxes Operating expenses Sales Amount Amount Amount Amount Amount Amount Amount Amount Amount (a) Compute the following items for Bradburn Corporation: (1) Current ratio for fiscal years 2014 and 2015 Current assets Amount 2014 Current ratio Formula to 1 ----= Current liabilities Amount Current assets Formula to 1 2015 Current ratio Formula Current liabilities Formula (2) Acid-test (quick) ratio for fiscal years 2014 and 2015 Current assets - Inventories Formula 2014 Quick ratio Formula - --= Current liabilities Formula to 1 Formula Current assets Inventories 2015 Quick ratio Formula - = Current li Formula lities to 1 (3) Inventory turnover for fiscal year 2015. Cost of goods sold Amount Formula 2015 Inventory Turnover = #N/A Average inventory to 1 (4) Return on assets for fiscal years 2014 and 2015. (Assume total assets were at March 31, 2013.) $1,688,500 Net income Formula 2014 Return on assets Formula ---- = Formula Average total assets Net income Formula 2015 Return on assets = Formula Average total assets Formula (5) Percentage change in sales, cost of goods sold, gross margin, and net income after taxes from fiscal year 2014 to 2015. Omit "000" from the values. Percent Change Formula Formula 2014 Formula 2015 Change Formula Sales Formula Cost of goods sold Gross margin Formula Formula Formula Formula Formula Formula Formula Formula Formula Net income after taxes Formula Formula Note: The formulas in some cell formulas are "live" and need values placed in their source cells. (b) Identify and explain what other financial reports and/or financial analyses might be helpful to the commercial loan officer of Topeka National Bank in evaluating Daniel Brown's request for a time extension on Bradburn's notes. Other financial reports and financial analyses which might be helpful to the commercial loan officer of Spokane National Bank include: Enter text ans wer as appropriate. 1 Enter text answer as appropriate. 2 Enter text answer as appropriate. 3 4. Enter text answer as appropriate. (c) 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 finance the plant expansion from internally generated funds real istic? Discuss. each of the next 2 years. Is Bradburn's des ire to (c) 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. Enter text answer as appropriate. 2015 2016 Formula Formula Formula 2017 Formula Formula Sales Formula Formula Title Gross margin Formula Formula Title Formula Formula Formula Formula Income before taxes Formula Formula Formula Formula Title Formula Formula Net income Formula Formula Add: Title Deduct: Title Amount Amount Amount Amount Amount Note repayment Funds available for plant expansion Plant expansion Excess funds Formula Formula Amount Formula Amount Formula Assumptions: Sales increase at a rate of Cost of goods sold increas es at rate of despite depreciation remaining constant. Other operating expenses increase at the same rate experienced from 2012 to 2013; i.e., at Depreciation remains constant at Dividends remain at per share Plant expansion is financed equally over the two years( Loan extension is granted. each year) (d) Should Topeka National Bank grant the extension on Bradburn's notes considering Daniel Brown's statement about financing the plant expansion through internally generated funds? Discuss. Enter text answer here