Exhibit 1 Operating Statements for Years Ending December 31, 2001–

2003, and for First Quarter 2004 (thousands of dollars)

Projected Income Statement
2001 2002 2003 2004
Take discount Skip discount
Net sales $1,697 $2,013 $2,694 3,600 3,600
Cost of goods sold
Beginning inventory 183 239 326 418 418
Purchases 1,278 1,524 2,042 2,729 2,801
$1,461 $1,763 $2,368 $3,147 $3,219
Ending inventory 239 326 418 541 541
Total cost of goods sold $1,222 $1,437 $1,950 $2,606 $2,678
Gross profit 475 576 744 $994 $922
Operating expenseb 425 515 658 864 864
Interest expense 13 20 33 33 33
Net income before taxes $37 $41 $53 $97 $25
Provision for income taxes 6 7 9 34 9
Net income $31 $34 $44 63 16
Source: Case author.
b
Operating expenses include a cash salary for Mark Cartwright of $75,000 in 2001, $85,000 in
2002, $95,000 in 2003, and $22,000 in the first quarter of 2004. Cartwright also received some
a
In the first quarter of 2003 sales were $698,000 and net income was $7,000.
of the perquisites commonly taken by owners of privately held businesses.

Sales $1,697 $2,013 $2,694 $3,600 $3,600

Sales growth, % 19% 34% 34% 34%

COGS, % of sales 72% 71% 72% 72% 74%

COGS, $ $1,222 $1,437 $1,950 $2,606 $2,678

Operating expense:
Labor excluding owner salary 180 221 289 390 390
Rent 85 104 137 184 184
Utilities 30 37 48 65 65
Insurance 13 16 21 28 28
Promotion & marketing 21 26 34 46 46
CPA fees 21 26 34 46 46
Owner salary 75 85 95 105 105
Total $425 $515 $657 $864 $864
25% 26% 24% 24% 24%

Operating expenses - Owner s 350 430 563 759 759

Days Sales in A/R 37 40 43 43 43

A/R $ $171.00 $222.00 $317.00 $424.11 $424.11

Days COGS in Inventory 71 83 78 78 78

Inventory $ $239.00 $326.00 $418.00 $557 $572

Days COGS in A/P 37 49 48 10 30

A/P $ $124.00 $192.00 $256.00 $290 $893
Dias de caja 12 8 5 4 4

Ciclo de conversión de caja 71 74 73 111 91

PP&E, net
Beginning Balance 112 $126 $140
Capex, current year - - -
(Depreciation), current year 14 $14 $17
Ending Balance 126 140 157

Long Term Debt

Beginning Balance $78 $71 $64
(Principal Repayments) ($7) ($7) ($7)
Ending Balance 71 64 57

Average balance on LOC 103.15 185.40 369.92

Seasonality affect on avg balan 5.0% 5.0% 5.0%
Interest rate 6.5% 7.5% 7.3%
Interest expense on LOC $7 $15 $28

Average balance on LT Debt $75 $68 $61

Interest rate 8.0% 8.0% 8.0%
Interest expense on LT Debt 5.96 5.4 4.84

13 20 33
 Exhibit 2 Balance Sheets at December 31, 2001–2003, and
March 31, 2004 (thousands of dollars)

Notas/ Premisas 2001 2002 2003

Mencionado en el caso Cash $58 $48 $41

Accounts receivable, net 171 222 317
Inventory 239 326 418
Current assets $468 $596 $776
Property, net 126 140 157
Total assets $594 $736 $933

Notes payable, bank - $146 $233

Se asume mismo nivel que en 2003 24% Notes payable, Stark 105 - -
Se asume misma cantidad que en 2003 Notes payable, trade - - -
Accounts payable 124 192 256
el 35% Accrued expenses 24 30 39
<= CAMBIO DE RENTABILIDAD Long-term debt, current portion 7 7 7
Current liabilities $260 $375 $535
Long-term debt 64 57 50
Total liabilities $324 $432 $585
Net worth 270 304 348
Total liabilities and net
worth $594 $736 $933

Source: Case author.

CDV más alto por descuento financiero A- (L+NW) $0 $0 $0

% acreedores vs compras 13%

Incremento de 10 (igual que últimos 2 años)

Mismo que en 2003 (se asume)

Días de Cobro = Deudores / (Ventas / 365)

Días de Existencia = Inventario / (Costo de Ventas / 365)

Días de Pago = Cuentas x pagar / (Costo de Ventas /365)

Días de Caja = Caja / (Gastos / 360)

CCC = Deudores + inventario - proveedores

 Origen y Aplicación
Projected Income Balance Sheets 1-Jan 31-Dec
2004 Notas/ Premisas 2002 2003 2004 02 + 03
Take discount Skip discount
41 41 Mantener mismo nivel (para forzar al cré $10 $7 $10 $17
424 424 Mismo radio de días de 2003 $51 $95 $28 $146
557 572 Mismo radio, con/sin increm por valor $87 $92 $138 $179
1,022 1,037
157 157 Se asume que la DEP es igual a nuevas $14 $17 $5 $31
1,179 1,194

64 164 GOAL SEEK $146 $87 $14 $233

- - $105 $0 $0 $105
157 157 - - $157
394 404 Impacto de aprovechar o no el dscto. 1 $68 $64 $13 $132
39 39 Mismo valor que en 2003 $6 $9 $3 $15
7 7 Mismo valor que en 2003 - - - -
661 771
43 43 Se pagan los tradicionales 7 $7 $7 $3 $14
704 814
411 364 $34 $44 $9 $78

1,179 1,194 Sources $244 197 -3 $441

Uses $54 211 174 $265

$0 $0

43 43 Mismos días que en 2003

$424.11 $424.11

78 78 Mismos días que en 2003

$557 $572

10 30 Dependiendo del escenario

$71 $220
 Statements of Cash Flows 2002 2003 02-03
Net Income 34 44 78
Depreciation 14 17 31 Por diferencia de acumulados de balan
Inventory 87 92 179
Accounts receivable 51 95 146
Trade credit (Accounts payable) 68 64 132
Accrued expenses 6 9 15
Cash flows from operations 44 87 131

Capital expenditures 105 0 105

Cash flows from investing activities 105 0 105

Bank borrowing (Line of credit) 146 87 233

Reduce long-term debt 7 7 14
Cash flow from financing activities 139 80 219

Increase / (decrease) in cash 10 7 17

$10 $7 $17

$0 $0 $0
ncia de acumulados de balance general