For this week's Discussion, provide an answer to the case study questions with a recommendation.

Case Study:

The Exceptional Service Grading Company requires a capital infusion of $500,000. It is currently a closely held corporation with less than 25 shareholders. Although the shareholders are not all related to each other, they all know each other, and they view the business as a family business. The financial statements should be familiar to you because you performed a basic financial analysis of the company in Unit 1 of this course.

Several alternatives are available to the company, consisting of the following:

• Obtain private debt financing
• Seek out a private investor(s) who would be willing to share ownership (private transfer of partial ownership)
• Seek out offers for a private buy-out (private transfer of entire ownership)
• Issue public debt (corporate bonds)
• Issue public common stock (public equity offering)

Briefly discuss each alternative and include implications to the companys capital structure and cost of capital, if any. Considering the size of the investment ($500,000 infusion), provide a conclusion on how it might impact the financial statement reviewed in Unit 1. No calculations are required.

Balance Sheet items	2018		2017
CURRENT ASSETS
Cash	456,500		222,400	Cash increase - due to no dividends paid in 2018
Receivables	3,936,400		3,320,000
Inventory	89,800		100,200
Other assets	1,169,500		934,300
Total current assets	5,652,200		4,576,900	Current ratio 2017:
				Current ratio 2018:
LONG TERM ASSETS
Note Receivable	380,600		280,700	Some additional debt acquired in 2018
Equipment (net of depreciation)	975,000		1,017,800
Total long term assets	1,355,600		1,298,500
TOTAL ASSETS	7,007,800		5,875,400
LIABILITIES AND STOCKHOLDERS' EQUITY				Debt ratio 2017:
				Debt ratio 2018:
CURRENT LIABILITIES
Accounts payable	2,783,100		2,805,700
Note payable (current maturities)	277,550		272,550
Other accrued liabilities	265,300		214,600
Total current liabilities	3,325,950		3,292,850
LONG TERM LIABILITIES
Notes payable (long term)	454,800		454,800
Long term accrued liabilities	389,550		320,250
Total long term liabilities	844,350		775,050
TOTAL LIABILITIES	4,170,300		4,067,900
STOCKHOLDERS' EQUITY
Common stock	450,000		450,000
Retained Earnings	2,387,500		1,357,500
Total stockholders' equity	2,837,500		1,807,500
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY	7,007,800		5,875,400

Income Statement items	2018		2017	Answers/Comments
Service Contract Revenues	9,200,000		6,595,400	Increase in contracts
Service Contract Costs	(6,503,100)		(4,957,800)
Gross Profit	2,696,900		1,637,600	Gross profit margin 2017:
				Gross profit margin 2018:
General and Administrative Expenses	(896,000)		(756,000)
Operating Income	1,800,900		881,600	Increase in profit - see above comment
Gain on sale of equipment	59,900		7,700
Interest expense	(69,500)		(70,800)
Other expense	(9,600)		(63,100)
Income before taxes	1,781,700		755,400
Taxes	(451,700)		(300,900)
Net Income	1,330,000		454,500	Increase in net income from 2017-2018
Retained Earnings, Beginning Balance	1,057,500		1,053,000
	2,387,500		1,507,500
Less: Dividends paid	0		(150,000)	No dividend paid in 2018
Retained Earnings, Ending Balance	2,387,500		1,357,500