toy world

Exhibit No.1 Toy World, Inc.'s Pro-Forma Balance Sheet under Level Production, 1994 (thousands of dollars)

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.

Cash 628 816 200 200 200 200 200 200 200 200 200 200

1,060 260 300 300 280 280 300 1,780 3,460 3,980 4,425 3,400

1,050 1,502 1,940 2,391 2,843 3,294 3,733 3,220 2,565 1,714 769 586

Current Assets 2738 2578 2440 2891 3323 3774 4233 5200 6225 5894 5394 4186

Net plant & equipment 1,176 1,176 1,176 1,176 1,176 1,176 1,176 1,176 1,176 1,176 1,176 1,176

Total assets 3914 3754 3616 4067 4499 4950 5409 6376 7401 7070 6570 5362

250 250 250 250 250 250 250 250 250 250 250 250

0 0 106 760 1,367 2,060 2,700 3,341 4,000 3,159 2,087 764

30 (24) (165) (257) (316) (413) (474) (364) (263) (89) 105 130

Long-T-debt current portion 50 50 50 50 50 50 50 50 50 50 50 50

Current liabilities 330 276 241 803 1351 1947 2526 3277 4037 3370 2492 1194

Long-term debt 400 400 400 400 400 375 375 375 375 375 375 350

3,184 3,078 2,975 2,864 2,748 2,628 2,508 2,724 2,989 3,325 3,703 3,818

Total liabilities & equity 3914 3754 3616 4067 4499 4950 5409 6376 7401 7070 6570 5362

Exhibit No-2 Toy World, Inc.'s Pro Forma Income Statement under Level Production, 1994 (thousands of dollars)

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total

Net Sales 120 140 160 140 140 140 160 1,620 1,840 2,140 2,285 1,115 10,000

Account receivablea Inventoryb

Account payalec Notes payable, bankd Accrued taxese

shareholders' equityf

a_{Assumes a 60-day collection period.} b_{From Exhibit No-4.}

c_{Assume a 30-day payment period. December 31balance paid in january and constant balance maintained thereafter at the level of one month's purchases.} d_{Figure plugged as the difference between assets and all sources of funds except bank notes}.

e_{See footnote (g) to case Exhibit 1, and Exhibit No-5.}

78 91 104 91 91 91 104 1,055 1,198 1,393 1,488 726 6,510 Gross profit 42 49 56 49 49 49 56 565 642 747 797 389 3,490 205 207 209 211 213 215 217 214 211 208 203 202 2,515 Interest Expense 7 4 4 7 12 17 21 26 31 30 23 14 196 Interest Income 1 2 1 1 1 1 1 1 1 1 1 1 13 -171 -164 -158 -170 -177 -184 -183 324 399 508 570 172 766 -58 -56 -54 -58 -60 -63 -62 110 136 173 194 58 260 Net Profit -229 -220 -212 -228 -237 -247 -245 214 263 335 376 114 506

on the basis of the amount of inventory at the end of the month as a percent of the sum of the ending inventory figures for all 12 months.

Exhibit No-3 Cash Budget under Level production, 1994 (thousands of dollars)

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.

Inflows

Collections 1,965 940 120 140 160 140 140 140 160 1,620 1,840 2,140

After-tax interest income 1 2 1 1 1 1 1 1 1 1 1 1

Total 1,966 942 121 141 161 141 141 141 161 1,621 1,841 2,141

Cost of goods solda

Operationg Expensesb

Income taxesc

a_{65.10% of sales, reflecting labor saving of $490,000. Assumes a constant gross margin in each month}.

b_{Operating expenses of $ 2,400,000 are assumed evenly distributed throughout the year. The $115,000 of increased storage and handling costs are allocated to each month}

Outflows

Payments of account payable 282 250 250 250 250 250 250 250 250 250 250 250

Tax payments 0 0 88 35 0 35 0 0 35 0 0 34

Repayment of long-term debt 0 0 0 0 0 25 0 0 0 0 0 25

Operating expenses 205 207 209 211 213 215 217 214 211 208 203 202

Interest expenses 7 4 4 7 12 17 21 26 31 30 23 14

wages 292 293 292 292 293 292 293 292 293 292 293 293

Total 786 754 843 795 768 834 781 782 820 780 769 818

Net inflow (outflow) 1,180 188 -722 -654 -607 -693 -640 -641 -659 841 1,072 1,323

Beginning Cash 200 628 816 200 200 200 200 200 200 200 200 200

Ending cash before any loan

increase or repayment 1,380 816 94 -454 -407 -493 -440 -441 -459 1,041 1,272 1,523

Desired cash balance 200 200 200 200 200 200 200 200 200 200 200 200

Loan (repayment) increase (752) 0 106 654 607 693 640 641 659 -841 -1,072 -1,323

End-of-month loan 0 0 106 760 1,367 2,060 2,700 3,341 4,000 3,159 2,087 764

Exhibit No-4 Schedule of Changes Affecting inventory, 1994 (thousands of dollars) Month January $542 78 $464 586 1,050 February 543 91 $452 1,050 1,502 March 542 104 $438 1,502 1,940 April 542 91 $451 1,940 2,391 May 543 91 $452 2,391 2,843 June 542 91 $451 2,843 3,294 July 543 104 $439 3,294 3,733 August 542 1,055 ($513) 3,733 3,220 September 543 1,198 ($655) 3,220 2,565 October 542 1,393 ($851) 2,565 1,714 November 543 1,488 ($945) 1,714 769 December 543 726 ($183) 769 586 Month January 88 (58) 0 30 February 30 (56) 0 (26) March (26) (54) 88 (168) April (168) (58) 35 (261) May (261) (60) 0 (321) June (316) (63) 35 (413) July (413) (62) 0 (475) August (475) 110 0 (365) September (365) 136 35 (264) October (264) 174 0 (90) November (90) 194 0 104 December 104 59 34 129 Finished Goods

Completed Cost of Goods solda

Finished Goods Net

Change

Finished Goods Beginning of

Month End of the MonthFinished Goods

a_{At 65.10% of sales, reflecting $ 490,000 Labor Savings. Assumes a Constant Gross margin in each month.} Exhibit No-5 Calculation of Accrued Taxes for 1994 (thousands of dollars)Accrued Taxes _{From prior}

month

Taxes Payable on profits in

Montha _{Taxes Paid}b Accrued Taxes at _{End of Month}

b_{From footnote g, case Exhibit 1}. c_{From case Exhibit 1}.