FINANCIAL STATEMENTS AND TAXES Part I of this case, presented in Chapter 3, discussed the situation of DLeon Inc., a regional snack foods producer, after an expansion program. DLeon had increased plant capacity and undertaken a major marketing campaign in an attempt to go national. Thus far, sales have not been up to the forecasted level; costs have been higher than were projected; and a large loss occurred in 2016 rather than the expected profit. As a result, its managers, directors, and investors are concerned about the firms survival.

Donna Jamison was brought in as assistant to Fred Campo, DLeons chairman, who had the task of getting the company back into a sound financial position. DLeons 2015 and 2016 balance sheets and income statements, together with projections for 2017, are given in Tables IC 4.1 and IC 4.2. In addition, Table IC 4.3 gives the companys 2015 and 2016 financial ratios, together with industry average data. The 2017 projected financial statement data represent Jamisons and Campos best guess for 2017 results, assuming that some new financing is arranged to get the company over the hump.

Table IC 4.1 Balance Sheets 2017E 2016 2015 Assets Cash Accounts receivable Inventories $ 85,632 878,000 1,716,480 $2,680,112 1,197,160 380,120 817040 $ 7,282 632,160 1,287,360 $1,926,802 1,202,950 263,160 939,790 $2,866,592 57600 351,200 715200 1,124,000 491,000 146,200 344800 Total current assets Gross fixed assets Less accumulated depreciation Net fixed assets Total assets 152 $ 1468,800 Liabilities and Equity Accounts payable Accruals Notes payable 436,800 408,000 300,000 $1,144800 400,000 1,721,176 231,176 $1,952,352 524,160 489,600 636,808 1,650,568 723,432 460,000 32,592 $ 492,59.2 $ 145,600 136,000 200,000 481600 323432 460,000 203,768 663,768 2866 592 $1,468,800 Total current liabilities Long-term debt Common stock Retained eamings Total equity Total liabilities and equity $3,497,152S Note: E indicates estimated. The 2017 data are forecasts