Using the information in the Hanson Ski Products balance sheet for March 31, 1985 (Exhibit 2), and the fiscal year 1987 budgets (Exhibits 3 and 4), prepare a projected balance sheet for Hanson Ski Products for March 31, 1987, (To do this, you will need to estimate the size of the commercial bank loan-?? Notes-bank??-On that date.) Does your balance sheet tell you whether or not the plans on which the budgets are based are feasible?

3/31/1986 Current Assets Cash Receivables, net Inventories Prepaid expenses Total current assets $156 1,556 1,729 262 6/30/1986 9/30/1986 100 100 12/31/1986 $100 $4,739 $1,166 $198 $3,703 3,393 1,255 $2,138 207 $3,987 $1,743 $2,244 $283.00 Total Assets $6,048 $8,730 Liabilities Accounts payable Notes payablebanks Income taxes payable Current installmentslong-term debt $1,586 1,547a 149 1,010b $1,755 $3,041 $4,292 $100 $6,203 Fixed Assets Plant, property, and equipment Less accumulated depreciation and amortization Total net fixed assets Other assets 3/31/87 $5,003 Total current liabilities Long-term debt Term loan Notes payable to banks Total 1938 $6,645 -$207 --$-- $5,003 Stockholders' Equity: Common stock Additional paid-in capital Retained earnings (deficit) 1,249 105 402 $1,249 $105 $2,373 1,249 105 1,788 Total stockholders' equity $1,756 $3,727 $3,142 Total Equities $6,048 $8,730 Collateral Check Inventory 70% 1965600 Collateral 6/30/1986 Accounts Recivable 80% 507000 9/30/1986 3664000 1183000 2,931,200 12/31/1986 3791200 816200 3,032,960 3/31/1987 1392800 1308300 4,147,200 405,600 Note-Bank October November December Cash Recipts Cash Outflows Net Cash Flow Beginning Loan Balance Change in Cash Account Net cash Flow End Loan Balance Collateral Check Accounts Recivable 80% 10/31/1986 11/30/1986 12/31/1986 Inventory 70% Collateral Note-Bank Current Ratio 1.24 Quick Ratio 1.01 Net Working Capital 0.14 ROA 0.033 ROE 0.37 ROCE 0.93 Profit Margin 0.12 EPS 0.002 Assets Turnover Ratio 1.09 A/R Turnover Ratio 6.66 Inventory Turnover 1.81 Debt to Equity 2.44 Interest coverage Ratio 3.57 PE Ratio Market to Book Ratio Dividend Yield N/A Dividend Payout N/A ROA Exhibit 1 Hanson Ski Products, Income Statements ($000) FY 1984 FY 1985 FY 1986 3 Year total % Net sales Cost of goods solda $5,753 3,040 $7,671 4,140 $9,776 5,177 $23,200 12,357 100% 53% Gross margin Selling, general and administration Product development $2,713 1,585 152 $3,531 2,109 189 $4,599 2,519 260 47% 27% Operating earnings Interest expense $976 436 $1,233 428 $1,820 507 Income before tax and extraordinary item Tax provision $540 314 $805 468 $1,313 400 Earnings before extraordinary item $226 $337 $913 $10,843 $6,213 $601 $0 $4,029 $1,371 $0 $2,658 $1,182 $0 $1,476 $0 Extraordinary item tax benefit from utilization of operating loss carryforwards Net earnings 314 $540 468 $805 251 $1,164 $1,033 $2,509 Earnings per common share: Earnings before extraordinary item Extraordinary item 0.39 0.53 0.57 0.79 1.50 0.41 2.46 0.92 1.36 1.91 585,889 590,566 607,761 Net earnings Weighted average number of common shares outstanding a Depreciation and amortization for 1984, 1985, and 1986 was $341, $396, and $561, respectively. 11% Exhibit 2 Hanson Ski Products, Consolidated Balance Sheets ($000) 3/31/84 3/31/85 3/31/86 $163 692 1,352 99 $81 1,378 2,104 124 $156 1,556 1,729 262 $2,306 $3,687 $3,703 1,430 569 $861 171 1,958 836 $1,122 191 3,393 1,255 $2,138 207 $3,338 $5,000 $6,048 $536 1,100 -109 $967 2,082 -35 $1,586 1,547a 149 1,010b $1,745 $3,084 $4,292 1,423 506 1,407 -- --- $1,929 $1,407 $-- Stockholders' Equity: Common stock Additional paid-in capital Retained earnings (deficit) 1,126 105 (1,567) 1,166 105 (762) 1,249 105 402 Total stockholders' equity ($336) $509 $1,756 $3,338 $5,000 $6,048 Current Assets Cash Receivables, net Inventories Prepaid expenses Total current assets Fixed Assets Plant, property, and equipment Less accumulated depreciation and amortization Total net fixed assets Other assets Total Assets Liabilities Accounts payable Notes payablebanks Income taxes payable Current installmentslong-term debt Total current liabilities Long-term debt Term loan Notes payable to banks Total Total Equities a Borrowings under the revolving line of credit were personally guaranteed by the major stockholders and were secured by all of the accounts receivable, inventories, machinery and equipment, furniture, trademarks, and patent rights. b Current installments on long-term debt (3/31/86): Officers and stockholders Installment purchases Capital leases $841,000 169,000 -$1,010,000 Exhibit 3 FY 1987 Final Budget (June 15, 1986$000) 1st Quarter 3rd Quarter 4th Quarter April-June 1986 Net revenues Cost of goods sold 2nd Quarter JulySeptember 1986 OctoberDecember 1986 January-March 1987 TOTAL $391 344 $5,893 2,630 $4,769 2,176 $832 491 $11,885 5,641 $47 779 $3,263 1,204 $2,593 1,256 $341 926 $6,244 4,165 Operating income Tax allowance ($732) -- $2,059 432 $1,337 261 ($585) -- $2,079 693 Net income (loss) ($732) $1,627 $1,076 ($585) $1,386 Gross margin Operating expenses Exhibit 4 FY 1987 Cash Budget and Selected Expense and Balance Sheet Items (June 15, 1986; $000) 1st Quarter April-June 1986 Cash receipts Cash outflows For materials, labor, and operating expenses (except for interest but including income taxes)a Interest Capital expenditures for fixed assets Pay back stockholder loans Depreciation Assets at end of quarter Planned cash balance Receivables, net Inventories Prepaid expenses Other assets Liabilities at end of quarter Accounts payable Income taxes payable Current installments long-term debt 2nd Quarter 3rd Quarter 4th Quarter July-September October-December January-March 1986 1986 1987 $1,487 $1,764 $4,572 $3,800 1,928 67 2,967 110 2,698 168 2,022 86 177 - 238 - 179 841 301 - 143 166 179 195 100 507 2,808 241 201 100 4,580 1,690 294 247 100 4,739 1,166 198 283 100 1,741 1,869 283 302 1,849 - 1,717 - 1,755 - 1,664 - 980 1,060 207 189 Notes payablebanks (to be determined a In general, corporations must pay current year income taxes on a quarterly basis. However, the precise payment requirements are based on a complex set of rules that are different for large or small corporations. Exhibit 5 Third Quarter FY 1987 Cash Budget by Months ($000) October Cash receipts Cash outflow For materials, labor, and operating expenses (except for interest) Interest Capital expenditures Pay back stockholder loans Collateral for bank loans at end of month Receivables Inventory November December $1,000 $1,054 $2,518 830 1,065 803 54 69 - 56 62 841 58 48 - 5,420 1,331 5,517 1,363 4,739 1,166 3/31/1986 Current Assets Cash Receivables, net Inventories Prepaid expenses 6/30/1986 9/30/1986 12/31/1986 3/31/87 $156 1,556 1,729 262 100 507 2,808,000 241,000 100 4,580 1,690,000 294,000 $100 $4,739 $1,166 $198 $100 1,741,000 1,869,000 283,000 $3,703 3,656,000 6,664,000 $6,203 $3,993,000 Fixed Assets Plant, property, and equipment Less accumulated depreciation and amortization Total net fixed assets Other assets 3,393 3,570,000 1,255 1,398,000 $2,138 2,172,000 207 201,000 3,808,000 1,564,000 2,244,000 247,000 $3,987 $1,743 $2,244 $283.00 4,288,000 1938 $2,350,000 302,000 Total Assets $6,048 6,029,000 9,155,000 $8,730 Liabilities Accounts payable Notes payablebanks Income taxes payable Current installmentslong-term debt $1,586 1,547a 149 1,010b 1,849,000 2,176,000 1,717,000 3,727,000 $1,755 $3,041 980,000 1,060,000 $207 $1,755,000 1,650,000 -189,000 $4,292 5,005,000 6,504,000 $5,003 $3,503,000 Total current assets Total current liabilities Long-term debt Term loan Notes payable to banks Total --$-- Stockholders' Equity: Common stock Additional paid-in capital Retained earnings (deficit) 1,249 105 402 Total stockholders' equity 0 0 5,005,000 6,504,000 $1,756 Total Equities $6,645 1.249,000 105,000 -330,000 $6,048 4,780,000 1,249,000 105,000 1,297,000 $5,003 $3,503,000 1,249 105 1,788 $3,727 9,155,000 $1,249 $105 $2,373 $3,142 $8,730 $6,284 Collateral Check 6/30/1986 Accounts Recivable 80% 406,000 Inventory 70% 1,966,000 Collateral 2,372,000 9/30/1986 3,664,000 1,183,000 4,847 12/31/1986 3,791,000 816,000 4,607,000 3/31/1987 1,393,000 1,308,000 2,701,000 Note-Bank October Cash Recipts November December 100,000 100,000 100,000 Cash Outflows 4,572,000 Net Cash Flow Beginning Loan Balance Change in Cash Account Net cash Flow End Loan Balance Collateral Check Accounts Recivable 80% 10/31/1986 11/30/1986 12/31/1986 Inventory 70% Collateral Note-Bank Current Ratio 1.24 Quick Ratio 1.01 Net Working Capital 0.14 ROA 0.033 ROE 0.37 ROCE 0.93 Profit Margin 0.12 EPS 0.002 Assets Turnover Ratio 1.09 A/R Turnover Ratio 6.66 Inventory Turnover 1.81 Debt to Equity 2.44 Interest coverage Ratio 3.57 PE Ratio Market to Book Ratio Dividend Yield N/A Dividend Payout N/A ROA Exhibit 1 Hanson Ski Products, Income Statements ($000) FY 1984 FY 1985 FY 1986 3 Year total % Net sales Cost of goods solda $5,753 3,040 $7,671 4,140 $9,776 5,177 $23,200 12,357 100% 53% Gross margin Selling, general and administration Product development $2,713 1,585 152 $3,531 2,109 189 $4,599 2,519 260 47% 27% Operating earnings Interest expense $976 436 $1,233 428 $1,820 507 Income before tax and extraordinary item Tax provision $540 314 $805 468 $1,313 400 Earnings before extraordinary item $226 $337 $913 $10,843 $6,213 $601 $0 $4,029 $1,371 $0 $2,658 $1,182 $0 $1,476 $0 Extraordinary item tax benefit from utilization of operating loss carryforwards Net earnings 314 $540 468 $805 251 $1,164 $1,033 $2,509 Earnings per common share: Earnings before extraordinary item Extraordinary item 0.39 0.53 0.57 0.79 1.50 0.41 2.46 0.92 1.36 1.91 585,889 590,566 607,761 Net earnings Weighted average number of common shares outstanding a Depreciation and amortization for 1984, 1985, and 1986 was $341, $396, and $561, respectively. 11% Exhibit 2 Hanson Ski Products, Consolidated Balance Sheets ($000) 3/31/84 3/31/85 3/31/86 $163 692 1,352 99 $81 1,378 2,104 124 $156 1,556 1,729 262 $2,306 $3,687 $3,703 1,430 569 $861 171 1,958 836 $1,122 191 3,393 1,255 $2,138 207 $3,338 $5,000 $6,048 $536 1,100 -109 $967 2,082 -35 $1,586 1,547a 149 1,010b $1,745 $3,084 $4,292 1,423 506 1,407 -- --- $1,929 $1,407 $-- Stockholders' Equity: Common stock Additional paid-in capital Retained earnings (deficit) 1,126 105 (1,567) 1,166 105 (762) 1,249 105 402 Total stockholders' equity ($336) $509 $1,756 $3,338 $5,000 $6,048 Current Assets Cash Receivables, net Inventories Prepaid expenses Total current assets Fixed Assets Plant, property, and equipment Less accumulated depreciation and amortization Total net fixed assets Other assets Total Assets Liabilities Accounts payable Notes payablebanks Income taxes payable Current installmentslong-term debt Total current liabilities Long-term debt Term loan Notes payable to banks Total Total Equities a Borrowings under the revolving line of credit were personally guaranteed by the major stockholders and were secured by all of the accounts receivable, inventories, machinery and equipment, furniture, trademarks, and patent rights. b Current installments on long-term debt (3/31/86): Officers and stockholders Installment purchases Capital leases $841,000 169,000 -$1,010,000 Exhibit 3 FY 1987 Final Budget (June 15, 1986$000) 1st Quarter 3rd Quarter 4th Quarter April-June 1986 Net revenues Cost of goods sold 2nd Quarter JulySeptember 1986 OctoberDecember 1986 January-March 1987 TOTAL $391 344 $5,893 2,630 $4,769 2,176 $832 491 $11,885 5,641 $47 779 $3,263 1,204 $2,593 1,256 $341 926 $6,244 4,165 Operating income Tax allowance ($732) -- $2,059 432 $1,337 261 ($585) -- $2,079 693 Net income (loss) ($732) $1,627 $1,076 ($585) $1,386 Gross margin Operating expenses Exhibit 4 FY 1987 Cash Budget and Selected Expense and Balance Sheet Items (June 15, 1986; $000) 1st Quarter April-June 1986 Cash receipts Cash outflows For materials, labor, and operating expenses (except for interest but including income taxes)a Interest Capital expenditures for fixed assets Pay back stockholder loans Depreciation Assets at end of quarter Planned cash balance Receivables, net Inventories Prepaid expenses Other assets Liabilities at end of quarter Accounts payable Income taxes payable Current installments long-term debt 2nd Quarter 3rd Quarter 4th Quarter July-September October-December January-March 1986 1986 1987 $1,487 $1,764 $4,572 $3,800 1,928 67 2,967 110 2,698 168 2,022 86 177 - 238 - 179 841 301 - 143 166 179 195 100 507 2,808 241 201 100 4,580 1,690 294 247 100 4,739 1,166 198 283 100 1,741 1,869 283 302 1,849 - 1,717 - 1,755 - 1,664 - 980 1,060 207 189 Notes payablebanks (to be determined a In general, corporations must pay current year income taxes on a quarterly basis. However, the precise payment requirements are based on a complex set of rules that are different for large or small corporations. Exhibit 5 Third Quarter FY 1987 Cash Budget by Months ($000) October Cash receipts Cash outflow For materials, labor, and operating expenses (except for interest) Interest Capital expenditures Pay back stockholder loans Collateral for bank loans at end of month Receivables Inventory November December $1,000 $1,054 $2,518 830 1,065 803 54 69 - 56 62 841 58 48 - 5,420 1,331 5,517 1,363 4,739 1,166 3/31/1986 Current Assets Cash Receivables, net Inventories Prepaid expenses 6/30/1986 9/30/1986 12/31/1986 3/31/87 $156 1,556 1,729 262 100 507 2,808,000 241,000 100 4,580 1,690,000 294,000 $100 $4,739 $1,166 $198 $100 1,741,000 1,869,000 283,000 $3,703 3,656,000 6,664,000 $6,203 $3,993,000 Fixed Assets Plant, property, and equipment Less accumulated depreciation and amortization Total net fixed assets Other assets 3,393 3,570,000 1,255 1,398,000 $2,138 2,172,000 207 201,000 3,808,000 1,564,000 2,244,000 247,000 $3,987 $1,743 $2,244 $283.00 4,288,000 1938 $2,350,000 302,000 Total Assets $6,048 6,029,000 9,155,000 $8,730 Liabilities Accounts payable Notes payablebanks Income taxes payable Current installmentslong-term debt $1,586 1,547a 149 1,010b 1,849,000 2,176,000 1,717,000 3,727,000 $1,755 $3,041 980,000 1,060,000 $207 $1,755,000 1,650,000 -189,000 $4,292 5,005,000 6,504,000 $5,003 $3,503,000 Total current assets Total current liabilities Long-term debt Term loan Notes payable to banks Total --$-- Stockholders' Equity: Common stock Additional paid-in capital Retained earnings (deficit) 1,249 105 402 Total stockholders' equity 0 0 5,005,000 6,504,000 $1,756 Total Equities $6,645 1.249,000 105,000 -330,000 $6,048 4,780,000 1,249,000 105,000 1,297,000 $5,003 $3,503,000 1,249 105 1,788 $3,727 9,155,000 $1,249 $105 $2,373 $3,142 $8,730 $6,284 Collateral Check 6/30/1986 Accounts Recivable 80% 406,000 Inventory 70% 1,966,000 Collateral 2,372,000 9/30/1986 3,664,000 1,183,000 4,847 12/31/1986 3,791,000 816,000 4,607,000 3/31/1987 1,393,000 1,308,000 2,701,000 Note-Bank October Cash Recipts November December 100,000 100,000 100,000 Cash Outflows 4,572,000 Net Cash Flow Beginning Loan Balance Change in Cash Account Net cash Flow End Loan Balance Collateral Check Accounts Recivable 80% 10/31/1986 11/30/1986 12/31/1986 Inventory 70% Collateral Note-Bank Current Ratio 1.24 Quick Ratio 1.01 Net Working Capital 0.14 ROA 0.033 ROE 0.37 ROCE 0.93 Profit Margin 0.12 EPS 0.002 Assets Turnover Ratio 1.09 A/R Turnover Ratio 6.66 Inventory Turnover 1.81 Debt to Equity 2.44 Interest coverage Ratio 3.57 PE Ratio Market to Book Ratio Dividend Yield N/A Dividend Payout N/A ROA Exhibit 1 Hanson Ski Products, Income Statements ($000) FY 1984 FY 1985 FY 1986 3 Year total % Net sales Cost of goods solda $5,753 3,040 $7,671 4,140 $9,776 5,177 $23,200 12,357 100% 53% Gross margin Selling, general and administration Product development $2,713 1,585 152 $3,531 2,109 189 $4,599 2,519 260 47% 27% Operating earnings Interest expense $976 436 $1,233 428 $1,820 507 Income before tax and extraordinary item Tax provision $540 314 $805 468 $1,313 400 Earnings before extraordinary item $226 $337 $913 $10,843 $6,213 $601 $0 $4,029 $1,371 $0 $2,658 $1,182 $0 $1,476 $0 Extraordinary item tax benefit from utilization of operating loss carryforwards Net earnings 314 $540 468 $805 251 $1,164 $1,033 $2,509 Earnings per common share: Earnings before extraordinary item Extraordinary item 0.39 0.53 0.57 0.79 1.50 0.41 2.46 0.92 1.36 1.91 585,889 590,566 607,761 Net earnings Weighted average number of common shares outstanding a Depreciation and amortization for 1984, 1985, and 1986 was $341, $396, and $561, respectively. 11% Exhibit 2 Hanson Ski Products, Consolidated Balance Sheets ($000) 3/31/84 3/31/85 3/31/86 $163 692 1,352 99 $81 1,378 2,104 124 $156 1,556 1,729 262 $2,306 $3,687 $3,703 1,430 569 $861 171 1,958 836 $1,122 191 3,393 1,255 $2,138 207 $3,338 $5,000 $6,048 $536 1,100 -109 $967 2,082 -35 $1,586 1,547a 149 1,010b $1,745 $3,084 $4,292 1,423 506 1,407 -- --- $1,929 $1,407 $-- Stockholders' Equity: Common stock Additional paid-in capital Retained earnings (deficit) 1,126 105 (1,567) 1,166 105 (762) 1,249 105 402 Total stockholders' equity ($336) $509 $1,756 $3,338 $5,000 $6,048 Current Assets Cash Receivables, net Inventories Prepaid expenses Total current assets Fixed Assets Plant, property, and equipment Less accumulated depreciation and amortization Total net fixed assets Other assets Total Assets Liabilities Accounts payable Notes payablebanks Income taxes payable Current installmentslong-term debt Total current liabilities Long-term debt Term loan Notes payable to banks Total Total Equities a Borrowings under the revolving line of credit were personally guaranteed by the major stockholders and were secured by all of the accounts receivable, inventories, machinery and equipment, furniture, trademarks, and patent rights. b Current installments on long-term debt (3/31/86): Officers and stockholders Installment purchases Capital leases $841,000 169,000 -$1,010,000 Exhibit 3 FY 1987 Final Budget (June 15, 1986$000) 1st Quarter 3rd Quarter 4th Quarter April-June 1986 Net revenues Cost of goods sold 2nd Quarter JulySeptember 1986 OctoberDecember 1986 January-March 1987 TOTAL $391 344 $5,893 2,630 $4,769 2,176 $832 491 $11,885 5,641 $47 779 $3,263 1,204 $2,593 1,256 $341 926 $6,244 4,165 Operating income Tax allowance ($732) -- $2,059 432 $1,337 261 ($585) -- $2,079 693 Net income (loss) ($732) $1,627 $1,076 ($585) $1,386 Gross margin Operating expenses Exhibit 4 FY 1987 Cash Budget and Selected Expense and Balance Sheet Items (June 15, 1986; $000) 1st Quarter April-June 1986 Cash receipts Cash outflows For materials, labor, and operating expenses (except for interest but including income taxes)a Interest Capital expenditures for fixed assets Pay back stockholder loans Depreciation Assets at end of quarter Planned cash balance Receivables, net Inventories Prepaid expenses Other assets Liabilities at end of quarter Accounts payable Income taxes payable Current installments long-term debt 2nd Quarter 3rd Quarter 4th Quarter July-September October-December January-March 1986 1986 1987 $1,487 $1,764 $4,572 $3,800 1,928 67 2,967 110 2,698 168 2,022 86 177 - 238 - 179 841 301 - 143 166 179 195 100 507 2,808 241 201 100 4,580 1,690 294 247 100 4,739 1,166 198 283 100 1,741 1,869 283 302 1,849 - 1,717 - 1,755 - 1,664 - 980 1,060 207 189 Notes payablebanks (to be determined a In general, corporations must pay current year income taxes on a quarterly basis. However, the precise payment requirements are based on a complex set of rules that are different for large or small corporations. Exhibit 5 Third Quarter FY 1987 Cash Budget by Months ($000) October Cash receipts Cash outflow For materials, labor, and operating expenses (except for interest) Interest Capital expenditures Pay back stockholder loans Collateral for bank loans at end of month Receivables Inventory November December $1,000 $1,054 $2,518 830 1,065 803 54 69 - 56 62 841 58 48 - 5,420 1,331 5,517 1,363 4,739 1,166