Take the following information on a company, and say what assets the company has and where the money came from to own those assets (its liabilities and equity) at the end of two years of operation (assume the principal repayment on debt has been made for year 2): The company has gross sales of $48 million per year, and the pattern of sales is even, i.e. there is no cyclical pattern to sales. Customers are large firms with a typical large-firm payment pattern, i.e. 45 days in terms of payments COGS for the business is 60% and is material only; all labor costs are in SG&A. Monthly payroll is $200,000 There is enough raw material on hand to support one month of manufacturing, and two months of actual production of finished goods is in the warehouse (remember that finished goods in inventory are carried on the books as COGS, not expected sale price). The company pays its suppliers 30 days after goods received. The owners started the business with an initial capital injection of $5.6 million 25 months ago. The company borrowed $3 million of long term debt, with the principal repayable in 10 equal\ annual payments. The company bought $8 million in assets at start-up and picked a depreciation period of 10 years. No additional assets have been purchased. In the first two years of the business, the company had a cumulative net income of $1.8 million and paid dividends of $300,000 ($150,000 per year) to the owners. The business has a short-term credit line that runs positive or negative based on the fluctuations of the business (just like a personal checking account).

Assets Liabilities Current Assets Current Liabilities Cash Short-term credit line Receivables Accounts payable Short-term investments Accrued expenses Inventory Taxes payable Current portion of long-term debt Prepaid expenses Long-Term Debt Repayable grants Fixed Assets Land, building, and equipment at cost Less accumulated depreciation Long-term debt Shareholders' Equity Long-term investments Capital shares Goodwill Retained earnings Total assets Total liability and equity Working capital Working capital ratio