Bubble and Bee Organic - Pro Forma Modeling Template

Balance Sheet Income Statement

2013 2014 2015 2016 2017 2014 2015 2016 2017
Assets Revenues 1,776,168 2,042,581 2,348,986 2,701,330
Current Assets Cost of Goods Sold 357,597 408,516 493,287 567,279
Cash 25,567 43,008 233,341 342,469 640,954 Gross Margin 1,418,571 1,634,065 1,855,699 2,134,051
Receivables 32,375 35,525 40,852 46,980 54,027 Expenses
Inventories 131,250 143,937 163,406 187,919 216,106 Selling 439,512 510,645 610,736 729,359
Total Current Assets 189,192 222,470 437,599 577,368 911,087 General & Administrative Variable 82,514 102,129 117,449 135,066
Fixed Assets General & Administrative Fixed 572,776 675,000 725,000 775,000
PP&E 395,785 470,185 470,185 570,185 570,185 Depreciation 87,221 95,221 105,221 105,221
Less Depreciation 120,221 207,442 302,663 407,884 513,105 Total Expenses 1,182,023 1,382,995 1,558,407 1,744,647
Total Fixed Assets 275,564 262,743 167,522 162,301 57,080 EBIT 236,548 251,069 297,292 389,404
Net Interest Expense 7,535
Total Assets 464,756 485,213 605,121 739,669 968,167 Taxable Income 229,013 251,069 297,292 389,404
Taxes - - - -
Liabilities & Shareholder's Equity Net Income 229,013 251,069 297,292 389,404
Current Liabilities Cash Flow Statement
Accounts Payable 44,625 53,286 81,703 93,959 108,053
Accrued Liabilities - - - - - Cash Provided (used) by Operations
Bank Loan 201,796 159,579 - - - Net Income 229,013 251,069 297,292 389,404
Total Current Liabilities 246,421 212,865 81,703 93,959 108,053 Plus Depreciation 87,221 95,221 105,221 105,221
Long Term Liabilities - - - - - Change in Working Capital
Total Liabilities 246,421 212,865 81,703 93,959 108,053 Decrease (increase) in Receivables (3,150) (5,327) (6,128) (7,047)
Decrease (increase) in Inventory (12,687) (19,469) (24,512) (28,188)
Shareholder's Equity Increase (decrease) in Accts. Payable 8,661 28,417 12,256 14,094
Member's Equity 150,000 150,000 150,000 150,000 150,000 Increase (decrease) in Accrued Liabilities - - -
Retained Earnings 68,335 122,348 373,417 495,709 710,113 Cash Provided (used) by Operations 309,058 349,912 384,129 473,484
Total Shareholder's Equity 218,335 272,348 523,417 645,709 860,113 Cash Provided (used) by Investments
Additions to PP&E (74,400) - (100,000) -
Total Liabilities and Shareholder's Equity 464,756 485,213 605,121 739,669 968,167 Other Investments - - - -
Cash Provided (used) by Investments (74,400) - (100,000) -
Cash Provided (used) by Financing Activities
Assumptions 2014 2015 2016 2017 Additions (reductions) to Debt (42,217) (159,579) - -
Revenue Growth of about 15% per year Net issues of Stock - - - -
Unit Demand 126,869 143,339 161,999 183,141 (Dividends - Owner Draws) (175,000) - (175,000) (175,000)
Average Selling Price $ 14.00 $ 14.25 $ 14.50 $ 14.75 Cash Provided (used) by Financing Activities (217,217) (159,579) (175,000) (175,000)
COGS % as a % of Revenues 20% 21% 21% Net increase (decrease) in cash 17,441 190,333 109,129 298,484
Selling Expense as a % of Revenues 25% 26% 27%
General and Administrative Expense
Variable G&A as a % of Revenue 5% 5% 5%
Fixed G&A Expense 675,000 725,000 775,000
Depreciation Expense
Existing Equipment 87,221 95,221 95,221 95,221
Building - 30 years
New Equipment - 10,000 10,000
Total 87,221 95,221 105,221 105,221
Net Interest Expense - - -
Tax Rate NA due to LLC - - -
Receivables as a % of Revenues 2% 2% 2%
Inventory as a % of Revenues 8% 8% 8%
Accounts Payable as a % Revenues 4% 4% 4%
Accrued Liabilities % of Revenues - - -
Additions to PP&E - 100,000 -
Debt
Additions to Debt - Bank Loan
(Reductions) to Debt - Bank Loan
Additions to Debt - Long Term Debt
(Reductions) to Debt - Long Term Debt
Equity only financing
Dividends - Owner Draws 175,000 175,000 175,000
Bubble and Bee Organic - Pro Forma Modeling Template
Balance Sheet
2013 2014 2015 2016
Assets
Current Assets
Cash 25,567 43,008 130,074 11,179
Receivables 32,375 35,525 36,158 36,792
Inventories 131,250 143,937 144,631 147,168
Total Current Assets 189,192 222,470 310,862 195,139
Fixed Assets
PP&E 395,785 470,185 470,185 570,185
Less Depreciation 120,221 207,442 302,663 407,884
Total Fixed Assets 275,564 262,743 167,522 162,301

Total Assets 464,756 485,213 478,384 357,440

Liabilities & Shareholder's Equity

Current Liabilities
Accounts Payable 44,625 53,286 72,315 73,584
Accrued Liabilities - - - -
Bank Loan 201,796 159,579 - -
Total Current Liabilities 246,421 212,865 72,315 73,584
Long Term Liabilities - - - -
Total Liabilities 246,421 212,865 72,315 73,584

Shareholder's Equity
Member's Equity 150,000 150,000 150,000 150,000
Retained Earnings 68,335 122,348 256,069 133,856
Total Shareholder's Equity 218,335 272,348 406,069 283,856

Total Liabilities and Shareholder's Equity 464,756 485,213 478,384 357,440

Assumptions 2014 2015 2016

No Revenue Growth
Unit Demand 126,869 126,869 126,869
Average Selling Price $ 14.00 $ 14.25 $ 14.50
COGS % as a % of Revenues 20% 21%
Selling Expense as a % of Revenues 25% 26%
General and Administrative Expense
Variable G&A as a % of Revenue 5% 5%
Fixed G&A Expense 675,000 725,000
Depreciation Expense
Existing Equipment 87,221 95,221 95,221
Building - 30 years
New Equipment - 10,000
Total 87,221 95,221 105,221
Net Interest Expense - -
Tax Rate NA due to LLC - -
Receivables as a % of Revenues 2% 2%
Inventory as a % of Revenues 8% 8%
Accounts Payable as a % Revenues 4% 4%
Accrued Liabilities % of Revenues - -
Additions to PP&E - 100,000
Debt
Additions to Debt - Bank Loan
(Reductions) to Debt - Bank Loan
Additions to Debt - Long Term Debt
(Reductions) to Debt - Long Term Debt
Equity only financing
Dividends - Owner Draws 175,000 175,000
 Income Statement
2017 2014 2015
Revenues 1,776,168 1,807,883
Cost of Goods Sold 357,597 361,577
113,795 Gross Margin 1,418,571 1,446,307
37,426 Expenses
149,705 Selling 439,512 451,971
300,927 General & Administrative Variable 82,514 90,394
General & Administrative Fixed 572,776 675,000
570,185 Depreciation 87,221 95,221
513,105 Total Expenses 1,182,023 1,312,586
57,080 EBIT 236,548 133,721
Net Interest Expense 7,535
358,007 Taxable Income 229,013 133,721
Taxes - -
Net Income 229,013 133,721
Cash Flow Statement
74,853
- Cash Provided (used) by Operations
- Net Income 229,013 133,721
74,853 Plus Depreciation 87,221 95,221
- Change in Working Capital
74,853 Decrease (increase) in Receivables (3,150) (633)
Decrease (increase) in Inventory (12,687) (694)
Increase (decrease) in Accts. Payable 8,661 19,029
150,000 Increase (decrease) in Accrued Liabilities -
133,154 Cash Provided (used) by Operations 309,058 246,645
283,154 Cash Provided (used) by Investments
Additions to PP&E (74,400) -
358,007 Other Investments - -
Cash Provided (used) by Investments (74,400) -
Cash Provided (used) by Financing Activities
2017 Additions (reductions) to Debt (42,217) (159,579)
Net issues of Stock - -
126,869 (Dividends - Owner Draws) (175,000) -
$ 14.75 Cash Provided (used) by Financing Activities (217,217) (159,579)
21% Net increase (decrease) in cash 17,441 87,066
27%

5%
775,000

95,221

10,000
105,221
-
-
2%
 8%
4%
-
-

175,000
(Source: Constructed by authors based on company records)
 Financial Ratios
2016 2017 2014
1,839,601 1,871,318 Liquidity
386,316 392,977 Current Ratio 0.90
1,453,284 1,478,341 Quick Ratio 0.30

478,296 505,256 Cash Conversion Cycle

91,980 93,566 Inventory to Sale 140.44
725,000 775,000 Sale to Cash 6.98
105,221 105,221 Purchase to Payment 49.97
1,400,497 1,479,043 Cash Conversion Cycle 97.45
52,787 (702)
Leverage Ratios
52,787 (702) Total debt to assets 0.38
- - Interest Coverage 31.39
52,787 (702)
Profitability Ratios
Gross Profit Margin 79.87%
Operating Profit Margin 13.32%
52,787 (702) Net Profit Margin 12.89%
105,221 105,221 NOPAT Margin 13.32%

(634) (634) Efficiency and Return Measures

(2,537) (2,537) Sales to Total Assets Ratio 3.74
1,269 1,269 Operating Return on Assets 49.80%
- - Return on Assets 48.21%
156,105 102,616 Return on Equity 93.34%

(100,000) -
- -
(100,000) -

- -
- -
(175,000) -
(175,000) -
(118,895) 102,616
ny records)
2015 2016 2017

1.87 3.47 3.34

0.86 1.47 1.34

145.65 137.85 137.87

7.24 7.24 7.24
63.40 68.92 68.93
89.49 76.16 76.17

0.17 0.00 0.00

80.00% 79.00% 79.00%

7.40% 2.87% -0.04%
7.40% 2.87% -0.04%
7.40% 2.87% -0.04%

3.75 4.40 5.23

27.75% 12.63% -0.20%
27.75% 12.63% -0.20%
39.42% 15.30% -0.25%
Bubble and Bee Organic - Pro Forma Modeling Template
Balance Sheet
2013 2014 2015 2016
Assets
Current Assets
Cash 25,567 43,008 119,801 224,489
Receivables 32,375 35,525 40,852 46,980
Inventories 131,250 143,937 163,406 187,919
Total Current Assets 189,192 222,470 324,059 459,388
Fixed Assets
PP&E 395,785 470,185 1,570,185 1,670,185
Less Depreciation 120,221 207,442 339,330 481,218
Total Fixed Assets 275,564 262,743 1,230,855 1,188,967

Total Assets 464,756 485,213 1,554,914 1,648,355

Liabilities & Shareholder's Equity

Current Liabilities
Accounts Payable 44,625 53,286 81,703 93,959
Accrued Liabilities - - - -
Bank Loan 201,796 159,579 - -
Total Current Liabilities 246,421 212,865 81,703 93,959
Long Term Liabilities - - 960,960 929,523
Total Liabilities 246,421 212,865 1,042,663 1,023,482

Shareholder's Equity
Member's Equity 150,000 150,000 150,000 150,000
Retained Earnings 68,335 122,348 362,250 474,872
Total Shareholder's Equity 218,335 272,348 512,250 624,872

Total Liabilities and Shareholder's Equity 464,756 485,213 1,554,914 1,648,355

Assumptions 2014 2015 2016

Revenue Growth of about 15% per year
Unit Demand 126,869 143,339 161,999
Average Selling Price $ 14.00 $ 14.25 $ 14.50
COGS % as a % of Revenues 20% 21%
Selling Expense as a % of Revenues 25% 26%
General and Administrative Expense
Variable G&A as a % of Revenue 5% 5%
Fixed G&A Expense 600,000 650,000
Depreciation Expense
Existing Equipment 87,221 95,221 95,221
Building - 30 years 36,667 36,667
New Equipment - 10,000
Total 87,221 131,888 141,888
Net Interest Expense 49,500 48,003
Tax Rate NA due to LLC - -
Receivables as a % of Revenues 2% 2%
Inventory as a % of Revenues 8% 8%
Accounts Payable as a % Revenues 4% 4%
Accrued Liabilities % of Revenues - -
Additions to PP&E 1,100,000 100,000
Debt
Additions to Debt - Bank Loan
(Reductions) to Debt - Bank Loan
Additions to Debt - Long Term Debt 990,000
(Reductions) to Debt - Long Term Debt 29,040 31,437
Equity only financing
Dividends - Owner Draws 175,000 175,000
 Income Statement
2017 2014 2015
Revenues 1,776,168 2,042,581
Cost of Goods Sold 357,597 408,516
518,534 Gross Margin 1,418,571 1,634,065
54,027 Expenses
216,106 Selling 439,512 510,645
788,667 General & Administrative Variable 82,514 102,129
General & Administrative Fixed 572,776 600,000
1,670,185 Depreciation 87,221 131,888
623,106 Total Expenses 1,182,023 1,344,662
1,047,079 EBIT 236,548 289,402
Net Interest Expense 7,535 49,500
1,835,746 Taxable Income 229,013 239,902
Taxes - -
Net Income 229,013 239,902
Cash Flow Statement
108,053
- Cash Provided (used) by Operations
- Net Income 229,013 239,902
108,053 Plus Depreciation 87,221 131,888
896,514 Change in Working Capital
1,004,567 Decrease (increase) in Receivables (3,150) (5,327)
Decrease (increase) in Inventory (12,687) (19,469)
Increase (decrease) in Accts. Payable 8,661 28,417
150,000 Increase (decrease) in Accrued Liabilities -
681,178 Cash Provided (used) by Operations 309,058 375,412
831,178 Cash Provided (used) by Investments
Additions to PP&E (74,400) (1,100,000)
1,835,746 Other Investments - -
Cash Provided (used) by Investments (74,400) (1,100,000)
Cash Provided (used) by Financing Activities
2017 Additions (reductions) to Debt (42,217) 801,381
Net issues of Stock - -
183,141 (Dividends - Owner Draws) (175,000) -
$ 14.75 Cash Provided (used) by Financing Activities (217,217) 801,381
21% Net increase (decrease) in cash 17,441 76,793
27%

5%
700,000

95,221
36,667
10,000
141,888
46,431
-
2%
 8%
4%
-
-

33,009

175,000
(Source: Constructed by authors based on company records)
 Financial Ratios
2016 2017 2014
2,348,986 2,701,330 Liquidity
493,287 567,279 Current Ratio 0.90
1,855,699 2,134,051 Quick Ratio 0.30
Total Debt Ratio
610,736 729,359
117,449 135,066
650,000 700,000 Cash Conversion Cycle
141,888 141,888 Inventory to Sale 140.44
1,520,074 1,706,314 Sale to Cash 6.98
335,625 427,737 Purchase to Payment 49.97
48,003 46,431 Cash Conversion Cycle 97.45
287,622 381,306
- - Leverage Ratios
287,622 381,306 Total debt to assets 0.38
Interest Coverage 31.39

Profitability Ratios
287,622 381,306 Gross Profit Margin 79.87%
141,888 141,888 Operating Profit Margin 13.32%
Net Profit Margin 12.89%
(6,128) (7,047) NOPAT Margin 13.32%
(24,512) (28,188)
12,256 14,094 Efficiency and Return Measures
- - Sales to Total Assets Ratio 3.74
411,126 502,053 Operating Return on Assets 49.80%
Return on Assets 48.21%
(100,000) - Return on Equity 93.34%
- -
(100,000) -
AC Payable/COGS 14.90%
(31,437) (33,009)
- - EBIAT 54.77%
(175,000) (175,000)
(206,437) (208,009)
104,689 294,044
ny records)
2015 2016 2017

1.86 4.46 6.18

0.81 2.46 4.18

137.30 129.98 129.98

6.82 6.82 6.82
60.30 64.99 64.99
83.82 71.81 71.81

0.55 0.59 0.52

5.85 6.99 9.21

80.00% 79.00% 79.00%

14.17% 14.29% 15.83%
11.75% 12.24% 14.12%
14.17% 14.29% 15.83%

2.00 1.47 1.55

28.37% 20.96% 24.55%
23.52% 17.96% 21.89%
61.15% 50.59% 52.38%

20.00% 19.05% 19.05%

19.64% 21.59% 24.76%

Bubble and Bee Organic - Pro Forma Modeling Template
Balance Sheet
2013 2014 2015 2016
Assets
Current Assets
Cash 25,567 43,008 16,534 68,199
Receivables 32,375 35,525 36,158 36,792
Inventories 131,250 143,937 144,631 147,168
Total Current Assets 189,192 222,470 197,322 252,159
Fixed Assets
PP&E 395,785 470,185 1,570,185 1,670,185
Less Depreciation 120,221 207,442 339,330 481,218
Total Fixed Assets 275,564 262,743 1,230,855 1,188,967

Total Assets 464,756 485,213 1,428,177 1,441,126

Liabilities & Shareholder's Equity

Current Liabilities
Accounts Payable 44,625 53,286 72,315 73,584
Accrued Liabilities - - - -
Bank Loan 201,796 159,579 - -
Total Current Liabilities 246,421 212,865 72,315 73,584
Long Term Liabilities - - 960,960 929,523
Total Liabilities 246,421 212,865 1,033,275 1,003,107

Shareholder's Equity
Member's Equity 150,000 150,000 150,000 150,000
Retained Earnings 68,335 122,348 244,902 288,019
Total Shareholder's Equity 218,335 272,348 394,902 438,019

Total Liabilities and Shareholder's Equity 464,756 485,213 1,428,177 1,441,126

Assumptions 2014 2015 2016

Revenue Growth of about 15% per year
Unit Demand 126,869 126,869 126,869
Average Selling Price $ 14.00 $ 14.25 $ 14.50
COGS % as a % of Revenues 20% 21%
Selling Expense as a % of Revenues 25% 26%
General and Administrative Expense
Variable G&A as a % of Revenue 5% 5%
Fixed G&A Expense 600,000 650,000
Depreciation Expense
Existing Equipment 87,221 95,221 95,221
Building - 30 years 36,667 36,667
New Equipment - 10,000
Total 87,221 131,888 141,888
Net Interest Expense 49,500 48,003
Tax Rate NA due to LLC - -
Receivables as a % of Revenues 2% 2%
Inventory as a % of Revenues 8% 8%
Accounts Payable as a % Revenues 4% 4%
Accrued Liabilities % of Revenues - -
Additions to PP&E 1,100,000 100,000
Debt
Additions to Debt - Bank Loan
(Reductions) to Debt - Bank Loan
Additions to Debt - Long Term Debt 990,000
(Reductions) to Debt - Long Term Debt 29,040 31,437
Equity only financing
Dividends - Owner Draws 175,000 175,000
 Income Statement
2017 2014 2015
Revenues 1,776,168 1,807,883
Cost of Goods Sold 357,597 361,577
(8,625) Gross Margin 1,418,571 1,446,307
37,426 Expenses
149,705 Selling 439,512 451,971
178,507 General & Administrative Variable 82,514 90,394
General & Administrative Fixed 572,776 600,000
1,670,185 Depreciation 87,221 131,888
623,106 Total Expenses 1,182,023 1,274,253
1,047,079 EBIT 236,548 172,054
Net Interest Expense 7,535 49,500
1,225,586 Taxable Income 229,013 122,554
Taxes - -
Net Income 229,013 122,554
Cash Flow Statement
74,853
- Cash Provided (used) by Operations
- Net Income 229,013 122,554
74,853 Plus Depreciation 87,221 131,888
896,514 Change in Working Capital
971,367 Decrease (increase) in Receivables (3,150) (633)
Decrease (increase) in Inventory (12,687) (694)
Increase (decrease) in Accts. Payable 8,661 19,029
150,000 Increase (decrease) in Accrued Liabilities -
104,219 Cash Provided (used) by Operations 309,058 272,145
254,219 Cash Provided (used) by Investments
Additions to PP&E (74,400) (1,100,000)
1,225,586 Other Investments - -
Cash Provided (used) by Investments (74,400) (1,100,000)
Cash Provided (used) by Financing Activities
2017 Additions (reductions) to Debt (42,217) 801,381
Net issues of Stock - -
126,869 (Dividends - Owner Draws) (175,000) -
$ 14.75 Cash Provided (used) by Financing Activities (217,217) 801,381
21% Net increase (decrease) in cash 17,441 (26,474)
27%

5%
700,000

95,221
36,667
10,000
141,888
46,431
-
2%
 8%
4%
-
-

33,009

175,000
(Source: Constructed by authors based on company records)
 Financial Ratios
2016 2017
1,839,601 1,871,318 Liquidity
386,316 392,977 Current Ratio
1,453,284 1,478,341 Quick Ratio

478,296 505,256 Cash Conversion Cycle

91,980 93,566 Inventory to Sale
650,000 700,000 Sale to Cash
141,888 141,888 Purchase to Payment
1,362,164 1,440,710 Cash Conversion Cycle
91,120 37,631
48,003 46,431 Leverage Ratios
43,117 (8,800) Total debt to assets
- - Interest Coverage
43,117 (8,800)
Profitability Ratios
Gross Profit Margin
Operating Profit Margin
43,117 (8,800) Net Profit Margin
141,888 141,888 NOPAT Margin

(634) (634) Efficiency and Return Measures

(2,537) (2,537) Sales to Total Assets Ratio
1,269 1,269 Operating Return on Assets
- - Return on Assets
183,102 131,185 Return on Equity

(100,000) -
- -
(100,000) -

(31,437) (33,009)
- -
- (175,000)
(31,437) (208,009)
51,665 (76,824)
ny records)
2014 2015 2016 2017

0.90 1.47 3.08 2.90

0.30 0.46 1.08 0.90

140.44 145.65 137.85 137.87

6.98 7.24 7.24 7.24
49.97 63.40 68.92 68.93
97.45 89.49 76.16 76.17

0.38 0.59 0.66 0.68

31.39 3.48 1.90 0.81

79.87% 80.00% 79.00% 79.00%

13.32% 9.52% 4.95% 2.01%
12.89% 6.78% 2.34% -0.47%
13.32% 9.52% 4.95% 2.01%

3.74 1.89 1.28 1.40

49.80% 17.98% 6.35% 2.82%
48.21% 12.81% 3.01% -0.66%
93.34% 36.73% 10.35% -2.54%
1. What are the pros and cons of B&B's owners wanting to keep 100% control
g to keep 100% control of the business?
 2. What specific financial ratios, ratio trends, and other key factors will be taken into c
Financial Ratios
2014 2015 2016 2017
Liquidity

Current Ratio 0.90 1.86 4.46 6.18

Quick Ratio 0.30 0.81 2.46 4.18
Buy with 15%
revenue growth
Leverage Ratios
Total debt to assets 0.38 0.55 0.59 0.52
Interest Coverage 31.39 5.85 6.99 9.21

Financial Ratios
2014 2015 2016 2017
Liquidity
Current Ratio 0.90 1.47 3.08 2.90
Quick Ratio 0.30 0.46 1.08 0.90
Buy without 15%
revenue growth

Leverage Ratios
Total debt to assets 0.38 0.59 0.66 0.68
Interest Coverage 31.39 3.48 1.90 0.81

AC Payable/COGS 14.90% 20.00% 0.190476 0.190476

ors will be taken into consideration by the lender to assess whether they will fund the loan?

1 The lender will assess liquidity of the company and it's ability to meet short term obligations
With 15% revenue growth projection the current ratio and quick ratio increased from 0.9% & 0.3% to 6.18%
2 & 4.18% respectively
which has increased its financial leverage
3 Total debt to asset have been fairly stable after taking the loan in 2015. This indicates there's not much increase in b
risk after 2015.
Interest Coverage Ratio has increased from 5.85 in 2015 after taking the loan to 9.21 in 2017 indicating
companys increased ability to pay interests
4 Cuurent ratio and quick ratio has increased significantly indicating increased liquidity
and ability to meet short term/ current financial obligations

1 Without projected growth in sales Current ratio of the company will still be comfortable
However, looking at the Quick ratio of 2017 it seems if Inventory takes higher no days to convert into cash
company might find it difficult to meet their current liabilities.

2 Debt to asset ratio continues to rise in no growth scenario incdicating financial stress to the company.
Interest Coverage ratio indicates that by 2017 company cannot pay debt obligations by operating cash flow alone
and may need external debt or equity financing in the near future.

3 Apart from these lenders may look at Acs payable/COGS as a measure to look at if company has been depending o
which number looks stable from 2015
d the loan?

.9% & 0.3% to 6.18%

there's not much increase in business

n 2017 indicating

to convert into cash

o the company.
y operating cash flow alone

ompany has been depending on suppliers

 3. What factors (in addition to what the lender is assessing) should Greenwood

Financial Ratios 2014 2015 2016 2017

Cash Conversion Cycle

Inventory to Sale 140.44 137.30 129.98 129.98
Sale to Cash 6.98 6.82 6.82 6.82
Purchase to Payment 49.97 60.30 64.99 64.99
Cash Conversion Cycle 97.45 83.82 71.81 71.81
Buy With 15%
revenue growth
Profitability Ratios
Gross Profit Margin 79.87% 80.00% 79.00% 79.00%
Operating Profit Margin 13.32% 14.17% 14.29% 15.83%
Net Profit Margin 12.89% 11.75% 12.24% 14.12%
NOPAT Margin 13.32% 14.17% 14.29% 15.83%

Efficiency and Return Measures

Sales to Total Assets Ratio 3.74 2.00 1.47 1.55
Operating Return on Assets 49.80% 28.37% 20.96% 24.55%
Return on Assets 48.21% 23.52% 17.96% 21.89%
Return on Equity 93.34% 61.15% 50.59% 52.38%

Financial Ratios 2014 2015 2016 2017

Cash Conversion Cycle

Inventory to Sale 140.44 145.65 137.85 137.87
Sale to Cash 6.98 7.24 7.24 7.24
Purchase to Payment 49.97 63.40 68.92 68.93
Cash Conversion Cycle 97.45 89.49 76.16 76.17

Buy Without 15%

revenue growth
Profitability Ratios
Gross Profit Margin 79.87% 80.00% 79.00% 79.00%
Operating Profit Margin 13.32% 9.52% 4.95% 2.01%
Net Profit Margin 12.89% 6.78% 2.34% -0.47%
NOPAT Margin 13.32% 9.52% 4.95% 2.01%

Efficiency and Return Measures

Sales to Total Assets Ratio 3.74 1.89 1.28 1.40
Operating Return on Assets 49.80% 17.98% 6.35% 2.82%
Return on Assets 48.21% 12.81% 3.01% -0.66%
Return on Equity 93.34% 36.73% 10.35% -2.54%
ing) should Greenwood and Thomas consider before they take out a loan to buy the building?

1 Apart from factors assessed by lender owners should also look into profitability and Asset turnover
2 Although Gross Profit margin has been stable EBIT has increased from 14.17% to 15.83% in 2017
3 Net Profit margin and NOPAT has also increased
4 Cash conversion cycle has decresed from 83 days to 71 days

1 However with no growth Return on Equity and Net profit margin has throughly decresed

Owners of B&B should reconsider their decision if they decide to Buy and the possibility of no sales growt
In that case their net profit margin will decrese and they will have to go for ecternal financing again
 he building?

bility and Asset turnover

17% to 15.83% in 2017

hly decresed

he possibility of no sales growth

ecternal financing again
 4. What are the advantages and disadvantages of adding rental space in both the reven

Advantage
1 Company's liquidity will increase to meet current liabilities
2 Company'scash conversion cycle will be shortned
Rent With 15% revenue
3 EBIT & NOPAT margin will also increase
growth
Disadvantage
Return on Equity will decrese based on the assumptions

Advantage
1 Company's liquidity will increase to meet current liabilities
2 Company'scash conversion cycle will be shortned
Rent Without 15%
revenue growth
Disadvantage
Return on Equity will decrese severely based on the assumptions
Profit margins (EBIT, NOPAT) will also decrese severely
space in both the revenue growth of 15% and No Growth in Unit Demand scenarios?

assumptions
5. What recommendations would you make to B&B and why?
Ans We would recommend B&B to buy the building with loan to expand the facilities as our financial model sh
Profitability margins will also increase based on the projections and Return on Equity will be stable
As the organic industry has shown a trend of growing at 9.3% from 2014 to 2020 it's fair to project sales g
ities as our financial model shows increasing profitability, liquidity and leverage for the company.
on Equity will be stable
2020 it's fair to project sales growth at 15% based on which we have built the financial model
6. How has financial modeling helped the lender and B&B to make a better de
Ans 1. Financial modelling has helped B&B taking consideration of different scenarios of sa
2. or whether even without sales growth whether its possible to service debt all these q
3. Also the profitability measures help the company for accessing debt.

4. As for the lender financial model would help them to see the trends in liquidity, lever
5. This model helps them understand if the company will be able to repay the loan in fu
&B to make a better decision?
tion of different scenarios of sales projection. Based on whether a 15% sales growth would sustain borrowing money to buy building
sible to service debt all these questions are answered through the analysis of financial model
accessing debt.

see the trends in liquidity, leverage and profitability of the company.

l be able to repay the loan in future or just earn enough Operating Profit to merely cover the interest expense
g money to buy building
7. What suggestions do you have for improving the assumptions and financial modelin
and financial modeling for B&B?