Donna Lee, a graduate of the University of New York with 4 years of banking experience, was recently brought in as assistant to the chairman of the board of Computron Industries, a manufacturer of electronic calculators.

The company doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. Computron's results were not satisfactory, to put it mildly. Its board of directors, which consisted of its president and vice-president plus its major stockholders (who were all local businesspeople), was most upset when directors learned how the expansion was going. Suppliers were being paid late and were unhappy, and the bank was complaining about the deteriorating situation and threatening to cut off credit. As a result, Al Watkins, Computron's president, was informed that changes would have to be made, and quickly, or he would be fired. Also, at the board's insistence Donna Lee was brought in and given the job of assistant to Fred Campo, a retired banker who was Computron's chairman and largest stockholder. Campo agreed to give up a few of his golfing days and to help nurse the company back to health, with Lee's help.

Refer to attached financial statements and other data.

Balance Sheets 2018 2019 Assets Cash 9,000 7,282 Short-term investments 48,600 20,000 Accounts receivable 351,200 632,160 Inventories 715,200 1,287,360 Total current assets 1,124,000 1,946,802 Gross fixed assets 491,000 1,202,950 Less: Accumulated depreciation 146,200 263,160 Net fixed assets 344,800 939,790 TOTAL ASSETS 1,468,800 2,886,592 Liabilities and Equity Accounts payable 145,600 324,000 Notes payable 200,000 720,000 Accruals 136,000 284,960 Total current liabilities 481,600 1,328,960 Long-term debt 323,432 1,000,000 Common stock (100,000 shares) 460,000 460,000 Retained earnings 203,768 97,632 Total equity 663,768 557,632 TOTAL LIABILITIES AND EQUITY 1,468,800 2,886,592Income Statements 2018 2019 Sales 3,432,000 5,834,400 Cost of goods sold 2,864,000 4,980,000 Other expenses 340,000 720,000 Depreciation 18,900 116,960 Total operating costs 3.222,900 5,816,960 EBIT 209,100 17,440 Interest expense 62,500 176,000 EBT 146,600 (158,560) Taxes (40%) 58,640 (63,424) Net income 87.960 (95.136) Other Data 2018 2019 Stock price 8.50 6.00 Shares outstanding 100,000 100,000 EPS 0.880 (0.951) DPS 0.220 0.110 Tax rate 40% 40%Statement of Cash Flows, 2019 Operating Activities Net income (95,136) Adjustments Noncash adjustments: Depreciation 116,960 Changes in working capital: Change in accounts receivable (280,960) Change in inventories (572,160) Change in accounts payable 178,400 Change in accruals 148,960 Net cash provided by operating activities (503.936) Investing Activities Cash used to acquire fixed assets (711,950) Change in short-term investments 28,600 Net cash provided by investing activities (683,350) Financing Activities Change in notes payable 520,000 Change in long-term debt 676,568 Change in common stock Payment of cash dividends (11,000) Net cash provided by financing activities 1,185,568 Summary Net change in cash (1,718) Cash at beginning of year 9,000 Cash at end of year 7.282Statement of Retained Earnings, 2019 Balance of retained earnings, 12/31/2018 203,768 Add: Net income, 2019 (95,136) Less: Dividends paid, 2019 (11,000) Balance of retained earnings, 12/31/2019 97,632