Case Link Question (8) Directions: Click the "Case-link" displayed above and use the information provided in Brook Plumbing Supply, to answer this question: Which of the following describes a reasonable best-sase projection scenario for Brook Plumbing and Supply? Home Depot suspends plans to open a new store in Brook's city so sales increase 30% Brook's largest supplier successfully negotiates a renewal of its labor contract averting a major strike Zero to five percent growth in new housing starts helps increase sales by 8% Ten to fifteen percent growth in new housing starts helps increase sales by 15% Brook Plumbing Supply Company, Inc. Part A Company Information Brook Plumbing Supply Company is a wholesale distributor of plumbing products to building contractors and the trades. The company sells nearly all the parts and tools that plumbing companies need; it also sells to retail customers. Brook Plumbing was started and is owned by two brothers, Sam and David Brook, and has been in business for more than 25 years. The brothers have always managed all significant areas of the business without assistance. Brook's main office and warehouse are located in a medium-sized city. The company also has a branch sales office in a nearby community Freedom purchases plumbing supplies directly from manufacturers' representatives. Since almost all of the products are generic, the Brooks use several different sources. A recent trade checking show's them to be discount-to-prompt with all vendors. Brook Plumbing competes with other local building supply and plumbing wholesalers and hardware stores, and several national chain stores. Brook has built a reputation for meeting the special needs of local contractors and the trade- customers who require fast service, credit, and product expertise. Brook's sales representatives will visit building sites with contractors and even help them prepare bids and lay out jobs. Almost all of this work produces sales This organization has been Brook Plumbing's only financial institution for two years. Brook Plumbing Supply Company, Inc. Part B Brook Plumbing Supply Company, Inc. Balance Sheets (in $000s) As At December 31: 2083 2012 20Y1 ASSETS Current assets Cash and equivalents Accounts receivable Inventory Other current assets Total current assets 110 785 1,075 40 2,010 154 770 902 44 1,870 97 885 1,020 23 2,025 331 327 Fixed assets Gross fixed assets Less: Accumulated depreciation Net fixed assets 335 117 218 89 100 231 238 Other noncurrent assets 97 99 95 Brook Plumbing Supply Company, Inc. Part B Brook Plumbing Supply Company, Inc. Income Statements (in 5000s) Years Ended December 31: $ Sales Cost of goods sold Gross profit 2093 6,504 4,814 1,690 2012 5.801 4,258 1,543 2041 $ 5,120 3,661 1,459 General and administrative expense Selling expense Other expense Profit before taxes 905 417 65 303 901 387 58 197 915 385 51 108 Provision for income taxes 146 95 52 Net income 157 $ 102 56 Brook Plumbing Supply Company, Inc. Monthly Sales (in 5000s) Brook Plumbing Supply Company, Inc. Part B + Quick Cash Flow (in $000s) Company Name: Brook Plumbing Supply Company. Inc WI (U) S GFA (U) S 20Y2 20Y3 157 20 102 12 198 312 (4) (4) 304 0 0 304 (66) Net profit Plus: Depreciation, amortization expense Plus (or less): A Working investment Equals: Cash after operating cycle Plus (or less): Gross long-term assets Equals: Cash after capital investment cycle Less. Dividends declared Equals: Cash available for all debt repayment Less: Current portion long-term debt (prior year) Equals: Cash available for other debt repayment Change in working investment Accounts receivable (net) Plus: Inventory Less Accounts payable Less: Accrued expenses Equals: Working investment Beginning working investment Less: Ending working investment Equals: A Working investment (68) 236 BEGINNING 885 1.020 551 155 1,199 ENDING 770 902 528 143 1,001 1.199 1001 198 20Y2 ul. 10.01.10.0mmen DECININI CRININA 1199 1001 198 Beginning working investment Less Ending working investment Equals: A Working investment 2012 Change in working investment BEGINNING ENDING Accounts receivable (net) Plus: Inventory Less Accounts payable Less: Accrued expenses Equals: Working investment Beginning working investment Less Ending working investment Equals: A Working investment 20Y3 Change in working investment BEGINNING ENDING Accounts receivable (net) Plus Inventory Loss: Accounts payable Less Accrued expenses Equals. Working investment Beginning working investment Less Ending working investment Equals: A Working investment Are any changes in income taxes payable, interest payable, prepaid expenses, investments, or miscellaneous other accounts large enough to distort quick cash flow? Brook Plumbing Supply Company, Inc. Agings of Accounts Receivable 2083 March 31 Days from Date Total Invoices of Invoice Outstanding 0-30 $ 250,000 31-60 310,000 61-90 130,000 90+ 100.100 Total accounts receivable $790.100 June 30 Days from Date Total Invoices of Invoice Outstanding 0-30 $ 360,000 31-60 330,000 61-90 70,000 90+ 40.000 Total accounts receivable $ 800.000 September 30 Days from Date Total Invoices of Invoice Outstanding 0-30 $ 300,000 31-60 310,000 61-90 125,500 90+ 60.000 Total accounts receivable $ 795,500 December 31 Days from Date Total Invoices of Invoice Outstanding 0-30 $ 345,000 31-60 205,000 61-90 185,000 90+ 50.400 Total accounts receivable $ 785.400 Provision for income taxes 146 95 52 Net income 157 $ 102 $ 56 Brook Plumbing Supply Company, Inc. Monthly Sales (in $000s) 20Y3 2082 January $ 405 $ 398 February 455 405 March 480 450 April 496 455 May 575 520 June 610 545 615 570 August 640 590 September 597 505 October 543 459 November 532 439 December 556 465 July Case Link Question (8) Directions: Click the "Case-link" displayed above and use the information provided in Brook Plumbing Supply, to answer this question: Which of the following describes a reasonable best-sase projection scenario for Brook Plumbing and Supply? Home Depot suspends plans to open a new store in Brook's city so sales increase 30% Brook's largest supplier successfully negotiates a renewal of its labor contract averting a major strike Zero to five percent growth in new housing starts helps increase sales by 8% Ten to fifteen percent growth in new housing starts helps increase sales by 15% Brook Plumbing Supply Company, Inc. Part A Company Information Brook Plumbing Supply Company is a wholesale distributor of plumbing products to building contractors and the trades. The company sells nearly all the parts and tools that plumbing companies need; it also sells to retail customers. Brook Plumbing was started and is owned by two brothers, Sam and David Brook, and has been in business for more than 25 years. The brothers have always managed all significant areas of the business without assistance. Brook's main office and warehouse are located in a medium-sized city. The company also has a branch sales office in a nearby community Freedom purchases plumbing supplies directly from manufacturers' representatives. Since almost all of the products are generic, the Brooks use several different sources. A recent trade checking show's them to be discount-to-prompt with all vendors. Brook Plumbing competes with other local building supply and plumbing wholesalers and hardware stores, and several national chain stores. Brook has built a reputation for meeting the special needs of local contractors and the trade- customers who require fast service, credit, and product expertise. Brook's sales representatives will visit building sites with contractors and even help them prepare bids and lay out jobs. Almost all of this work produces sales This organization has been Brook Plumbing's only financial institution for two years. Brook Plumbing Supply Company, Inc. Part B Brook Plumbing Supply Company, Inc. Balance Sheets (in $000s) As At December 31: 2083 2012 20Y1 ASSETS Current assets Cash and equivalents Accounts receivable Inventory Other current assets Total current assets 110 785 1,075 40 2,010 154 770 902 44 1,870 97 885 1,020 23 2,025 331 327 Fixed assets Gross fixed assets Less: Accumulated depreciation Net fixed assets 335 117 218 89 100 231 238 Other noncurrent assets 97 99 95 Brook Plumbing Supply Company, Inc. Part B Brook Plumbing Supply Company, Inc. Income Statements (in 5000s) Years Ended December 31: $ Sales Cost of goods sold Gross profit 2093 6,504 4,814 1,690 2012 5.801 4,258 1,543 2041 $ 5,120 3,661 1,459 General and administrative expense Selling expense Other expense Profit before taxes 905 417 65 303 901 387 58 197 915 385 51 108 Provision for income taxes 146 95 52 Net income 157 $ 102 56 Brook Plumbing Supply Company, Inc. Monthly Sales (in 5000s) Brook Plumbing Supply Company, Inc. Part B + Quick Cash Flow (in $000s) Company Name: Brook Plumbing Supply Company. Inc WI (U) S GFA (U) S 20Y2 20Y3 157 20 102 12 198 312 (4) (4) 304 0 0 304 (66) Net profit Plus: Depreciation, amortization expense Plus (or less): A Working investment Equals: Cash after operating cycle Plus (or less): Gross long-term assets Equals: Cash after capital investment cycle Less. Dividends declared Equals: Cash available for all debt repayment Less: Current portion long-term debt (prior year) Equals: Cash available for other debt repayment Change in working investment Accounts receivable (net) Plus: Inventory Less Accounts payable Less: Accrued expenses Equals: Working investment Beginning working investment Less: Ending working investment Equals: A Working investment (68) 236 BEGINNING 885 1.020 551 155 1,199 ENDING 770 902 528 143 1,001 1.199 1001 198 20Y2 ul. 10.01.10.0mmen DECININI CRININA 1199 1001 198 Beginning working investment Less Ending working investment Equals: A Working investment 2012 Change in working investment BEGINNING ENDING Accounts receivable (net) Plus: Inventory Less Accounts payable Less: Accrued expenses Equals: Working investment Beginning working investment Less Ending working investment Equals: A Working investment 20Y3 Change in working investment BEGINNING ENDING Accounts receivable (net) Plus Inventory Loss: Accounts payable Less Accrued expenses Equals. Working investment Beginning working investment Less Ending working investment Equals: A Working investment Are any changes in income taxes payable, interest payable, prepaid expenses, investments, or miscellaneous other accounts large enough to distort quick cash flow? Brook Plumbing Supply Company, Inc. Agings of Accounts Receivable 2083 March 31 Days from Date Total Invoices of Invoice Outstanding 0-30 $ 250,000 31-60 310,000 61-90 130,000 90+ 100.100 Total accounts receivable $790.100 June 30 Days from Date Total Invoices of Invoice Outstanding 0-30 $ 360,000 31-60 330,000 61-90 70,000 90+ 40.000 Total accounts receivable $ 800.000 September 30 Days from Date Total Invoices of Invoice Outstanding 0-30 $ 300,000 31-60 310,000 61-90 125,500 90+ 60.000 Total accounts receivable $ 795,500 December 31 Days from Date Total Invoices of Invoice Outstanding 0-30 $ 345,000 31-60 205,000 61-90 185,000 90+ 50.400 Total accounts receivable $ 785.400 Provision for income taxes 146 95 52 Net income 157 $ 102 $ 56 Brook Plumbing Supply Company, Inc. Monthly Sales (in $000s) 20Y3 2082 January $ 405 $ 398 February 455 405 March 480 450 April 496 455 May 575 520 June 610 545 615 570 August 640 590 September 597 505 October 543 459 November 532 439 December 556 465 July