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809B10
Teaching Note
BEST FINANCIAL SERVICES INC.
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Ian Dunn wrote this teaching note under the supervision of Elizabeth M.A. Grasby as an aid to instructors in the classroom use of the case Best Financial Services Inc., No. B09B010. This teaching note should not be used in any way that would prejudice the future use of the case. Ivey Management Services prohibits any form of reproduction, storage or transmittal without its written permission. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7; phone (519) 661-3208; fax (519) 661-3882; e-mail:
[email protected]. Copyright © 2009, Ivey Management Services
CASE SYNOPSIS
Version: (A) 2009-05-15
tC
On June 20, 2008, Linda Best, founder and sole shareholder of Best Financial Services Inc. (Best Financial), lost one of her top clients, Gerald Young, to a competitor. The loss forced Best to consider the future direction of her financial planning company and, specifically, how to grow the business. With Young’s departure, the sales level would be lower than in the previous year; therefore, Best was considering two major options to increase sales: (1) hire a new advisor, or (2) purchase a block of business. She also planned to revisit her marketing strategy to make the most of her marketing budget. Best would first analyse the company’s historic performance and then project financial performance based on the option chosen for her growth strategy.
No
TEACHING OBJECTIVES
This case covers a variety of the concepts learned in an introductory managerial accounting course. It is best suited for second-year or higher-level managerial accounting courses. The case may serve as a comprehensive case (to review these topics) or it could be used as a testing point. Proper case analysis requires students to complete the following: An industry analysis A corporate size-up A consumer analysis A statement of cash flows and interpretation Financial ratio calculations and analysis Differential analysis for each alternative Designing a marketing plan Preparing projected financial statements
Do
1. 2. 3. 4. 5. 6. 7. 8.
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8B09B10
SUGGESTED ASSIGNMENT QUESTIONS
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1. Perform a size-up of the industry. Identify the threats or opportunities. 2. Analyse Best Financial’s strengths and weaknesses. How will these corporate capabilities affect the growth strategy? 3. Complete a consumer analysis and analyse Best Financial’s client base. 4. Prepare and analyse the company’s statement of cash flows for the year ended December 31, 2007. 5. Prepare and analyse the relevant financial ratios for Best Financial. 6. Qualitatively assess the option of hiring a new advisor. Complete a differential analysis for this option. 7. Qualitatively assess the option of buying a block of business. Complete a differential analysis for this option. 8. Develop a promotional plan for Best to implement in the next fiscal year. 9. Prepare a projected statement of earnings and balance sheet for the year ended December 31, 2009. OR
As Linda Best, perform whatever analysis and make whatever recommendations you deem appropriate for Best Financial Services Inc. SUGGESTED TEACHING STRATEGY
This case is best taught over two 80-minute classes. A suggested teaching strategy is given below.
tC
First Class
Instructors may begin the class with a general discussion of financial planning and its purpose. Students will likely share their knowledge of the Certified Financial Planner (CFP) designation and their understanding of a financial planner’s responsibilities. This should help students understand their role in the case and the decisions to be made. It is a good time to ask the class to identify the goals of the company and its founder.
No
Many students will have no prior knowledge of this industry, so this initial information is critical to their understanding of the business. Through class discussion, instructors can guide the conversation to an industry analysis. The corporate capabilities can then be discussed, followed by the identification of the strengths and weaknesses of the company, as well as those of Linda Best. A brief consumer analysis can also ensue at this time. Using the data provided on Best Financial’s clients, students should extract implications that may influence their decisions and help them identify a target market for their promotional plan.
Do
The financial size-up should begin with the preparation of the statement of cash flows (SCF) for the year ended December 31, 2007. Students should use this financial tool to highlight areas of concern. Select ratios can then be calculated and analysed to provide insight into these areas of concern. Second Class
The future-oriented case analysis begins at this point. The first alternative is to hire an additional advisor. Students should qualitatively assess the pros and cons of this alternative and draw implications. A
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8B09B10
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differential analysis can then be completed to determine this option’s quantitative impact. The second alternative, buying a block of business, should be analysed in a similar manner: a qualitative assessment and a differential analysis. Since only one alternative can be pursued at the current time (case fact), students should decide which option is preferable. This decision must be based on all of the previous analysis completed by the students.
The promotional plan should then be discussed. Ideally, students should provide a target market for their plan, a list of activities and the message being conveyed for each option. It is important to ensure that plans fit the marketing budget outlined in the case.
ANALYSIS Role, Decision, Goals
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Finally, the class can be guided through the projected financial statements. These statements should incorporate the decisions the student has made throughout the case.
Students assume the role of Linda Best, founder and sole shareholder of Best Financial Services Inc. Best has complete autonomy over her decisions, and the success of the business is directly linked to her own personal success. The decisions revolve around developing a strategy to grow the business. Students must decide whether to hire a new advisor or purchase a block of business. Secondly, students are asked to develop a promotional plan for Best Financial.
tC
Best’s goals and objectives are to maximize profitability, maintain a satisfied client base and establish the company as a leader in the Sarnia area market. Personally, Best wants to be recognized as the expert in the area, and she wants to enjoy a comfortable income. It should be noted that she prefers to limit her time spent on the business so that she can enjoy her life outside of work.
No
Corporate Size-Up
Do
The financial services industry includes a diverse mix of banks, national corporations and small businesses, all of which compete for individuals’ investment dollars. The key success factors in this industry are trust and product offering. Trust can be inferred from the CFP designation, but it must also be earned through relationship-building. A noteworthy Canadian trend identifies over one-third of CFPs are over the age of 50. This means that several CFPs may soon be retiring, perhaps leading to less competition and the availability of blocks of business. The Sarnia market’s older population is attractive to financial planners who offer retirement plans. Also, the blue-collar workers are typically unionized and have pension funds, and some lack knowledge about investing. For this reason, they often come to a financial advisor for assistance with their retirement plans. Best Financial has been in business since 2001. Since its inception, the company has built a strong client list and appears to have a small team committed to helping its clients. It must be noted that Linda Best essentially is the business. The success of Best Financial relies on her ability to provide the required services: sound advice, interaction with clients and acceptable investment returns. Best’s radio experience demonstrates that she has strong communication skills, and her education provides her with the technical
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8B09B10
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aptitude to perform as a financial planner. When looking at the client data, Best Financial exemplifies the 80/20 rule: 80 per cent of a company’s assets under management belong to the top 20 per cent of the company’s clients. Best Financial has many clients in the 36-to-50 age range. This is a good sign since these clients still have many years left to generate employment income. They are likely to plan for retirement and invest a portion of this income with Best Financial if they are pleased with the services offered. Best Financial’s major weaknesses are its limited size and Best’s limited time (as one person) to devote to her clients. Statement of Cash Flows
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The statement of cash flows for Best Financial reveals a few insights about the company (see Exhibit TN1). First, net cash flow from operations is positive. The large amount is due to a healthy net income figure, which bodes well for the small business and can be considered a sustainable source of cash.
The major sources of cash are net earnings and the line of credit. The major uses of cash are dividends and long-term asset purchases. Net earnings appear to be financing the majority of the dividends. As the sole shareholder, Best can pay these large dividends to herself; however, she may want to restrict the amount of dividends to the company’s annual net earnings. Also, she should consider leaving some of the earnings in the company if she plans to use bank loans to facilitate her growth strategy. This change would show her commitment to the business and would make it easier for creditors to approve credit for the business.
tC
The line of credit and the sale of some marketable securities appear to be financing the company’s purchase of long-term assets. This is not a good example of matching long-term uses with long-term sources. The line of credit should be paid down with the company’s excess cash since it does not appear to be needed at the current time. The fixed asset purchases are reasonable, given the company’s recent sales growth and the need to replace office equipment from time to time; however, in the future, any long-term asset purchases should be financed through net earnings or a long-term source of credit.
No
Overall, Best must recognize that it is difficult to achieve growth and declare a large amount of dividends at the same time. In order to accomplish her goals, Best will need to compromise and reinvest some of the company’s net earnings to grow the business. Ratio Analysis
Profitability
Do
Given Best’s concerns about maintaining profitability in the current fiscal year, it is beneficial to examine the vertical analysis. The statement of earnings provided in the case also provides vertical analysis ratios. Since mutual fund trailers make up nearly 60 per cent of the company’s total revenue, as long as the company maintains its current clients and their investments, these trailer revenues continue to recur annually with little effort on Best’s behalf. Salaries and wages expenses are the largest portion of the operating expenses, as expected in a service company where emphasis is on relationships and service. One interesting piece in this statement is the $26,000 loss due to an agent error in fiscal 2006. We do not have much information about the cause of this error; however, students will recognize the need to take preventive measures so that a loss of this magnitude does not occur again. The decrease in operating expenses as a percentage of sales likely reflects efficiencies and good management. After removing the agent error from the operating expenses, there was still a nearly four per cent reduction in these operating
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expenses. Finally, the net earnings figure shows a very healthy profit margin of 44.2 per cent. The profit margin for Sun Life Financial, one of the key competitors, is 10.5 per cent, and the industry average ranges from 14 per cent to 50 per cent. This places Best Financial near the top end of this range and demonstrates sound operations and management.
Stability and Liquidity
If Best Financial is to consider requesting a bank loan to implement its growth strategy, it may be helpful to look at some of the company’s stability and liquidity ratios: 2006
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2007
Debt to equity Interest coverage Current ratio Age of Accounts Payable1
0.11 49.1× 5.68 34.6 days
0.08 27.0× 7.08 34.1 days
Growth
tC
Best Financial appears to be in a good position to take on more debt. The company currently has a minimal amount of debt and the interest coverage ratio is very healthy, so banks would be confident that Best Financial would pay back the loan. Sun Life Financial does show higher levels of debt in proportion to equity; however, the interest coverage is still healthy at 9.2 times. The current ratio is very healthy, well above the benchmark of 2:1; however, even higher returns could be earned by investing some of the excess cash. The age of accounts payable does not provide much insight, but many students will likely calculate it for use in their financial projections.
No
Since growth is a key issue in the case, it is useful to examine historical growth ratios in greater detail:
Sales growth Profit growth Asset growth
2006–07
9.9% 64.8% –2.7%
Do
These growth ratios convey Best Financial’s ability to significantly improve the bottom line without a drastic increase in sales or the addition of assets. Much of this profit growth comes from the fact that the agent error reduced Best’s net earnings by over $26,000 in fiscal 2006. More astute students will recognize this and remove the agent error from the equation, resulting in a “true” profit growth of 16 per cent. Regardless, operating expenses have been reduced, and this is a strong sign of good management for the company. Best must now find ways to continue increasing revenues. It should be noted that such growth may not be sustained without the purchase of new assets –– the existing office and its equipment may be capable of handling only a certain level of business. In addition, Sun Life Financial saw its sales drop by 12.8 per cent. This may raise concerns that the industry is not as strong as originally predicted or that it may be more difficult to grow sales in future years. 1
Accounts payable arise from the company’s marketing expenses. Age of accounts payable: $1,139 ÷ ($11,862 ÷ 360 days).
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8B09B10
Hiring a New Advisor – Qualitative Analysis
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The chart below summarizes the key benefits and drawbacks of hiring a new advisor: PROS
• • •
More employees are needed to handle an increase in the number of clients. Best would be able to spend more time away from the business once the new advisor is trained. A new advisor would have a network to draw from and generate new clients. A new advisor could fit into Best’s succession plan since she is considering early retirement.
• • •
It would be difficult to transition some clients over to the new advisor, knowing that trust must be earned by the advisor. The training and transition will be a lengthy process. Best needs to find an advisor who shares similar values, and the search may be difficult and time-consuming. In order to plan for the long-term and think about her succession plan, Best must ensure that the new advisor is dedicated to the business.
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•
CONS
•
Hiring a New Advisor – Quantitative Analysis
Implications
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A differential analysis can be performed to analyse this alternative from a quantitative standpoint (see Exhibit TN-2). The case takes place in the summer of 2008, so the differential analysis has been completed for fiscal 2009 in order to analyse the results on an annual basis.
Do
No
The high scenario shows that hiring an additional advisor would slightly increase Best Financial’s net cash flow each year. The increase is only $1,628 per annum; however, the investment required to hire a new advisor is not a large amount either, so this alternative provides a 35 per cent return on investment and the one-time costs would be paid back in 2.9 years. This option appears to be beneficial to Best Financial, but the sensitivity analysis raises some concerns. Under the low scenario, net cash flow is negative, providing a negative return on investment. The difference between these two scenarios highlights the risk of bringing on a new advisor to the business. The new advisor must generate at least enough mutual fund sales to cover the incremental annual expenses. Even with this risk, students will note that future revenues may increase significantly. The new advisor would be expected to sell at least $650,000 in mutual funds in his or her first year, but this amount may continue to increase year over year. Higher sales will also result in additional trailer revenue in future years. If Linda Best believes this would be the case, Best Financial could survive a loss with negative net cash flow in the first year. Buying a Block of Business –– Qualitative Analysis
The chart below summarizes the key benefits and drawbacks of purchasing a block of business from another advisor:
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8B09B10
PROS
• •
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CONS
The purchase would result in an immediate • increase in revenues for Best Financial. If Best and her employees treat the new clients as they do any other, they should be capable of • building a strong relationship and benefitting from additional revenues for many years. • •
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•
The retention rate is not known so there is considerable risk involved; success relies on maintaining clients from the block. Instilling trust in these clients could be difficult and time-consuming for Best. It could be challenging to find an advisor who has values and clients that are similar to Best’s. Best does not know much about Jeff Mitchell, and he has some clients who may not fit with Best’s strategy. Best Financial does not have the human resources to handle several additional clients at this time. Having employees work longer hours to handle this increase in clients may affect customer service and/or may not be to the current employees’ liking.
•
Buying a Block of Business –– Quantitative Analysis
Implications
tC
A differential analysis can be performed to analyse this alternative from a quantitative standpoint (see Exhibit TN-3). This differential analysis should be separate from the option of hiring a new advisor since the case states that Best would not be able to implement both options at the same time. Again, since the case takes place in the summer of 2008, the differential analysis has been completed for fiscal 2009 so that the results can be analysed on an annual basis.
No
Both the high and low scenarios for this alternative provide positive net cash flow and a healthy return on investment. The ROI falls between 41 per cent and 55 per cent, based on the retention rate; however, students should identify the retention rate as a large risk. There is nothing stopping a client from leaving Best Financial immediately if the block of business is purchased. Furthermore, this option may strain employee relations and the company’s human resources. Quantitatively, this option is superior to the option of hiring a new advisor, yet the qualitative assessment of this option does not appear as favourable, so students are forced to debate which is more important.
Do
At this point, students should choose the alternative they believe would best suit the needs of Best Financial and help the company achieve its goals. It is recommended that Best pursue the option of hiring a new advisor. The qualitative assessment reveals that Best would not be capable of managing all of the additional accounts if she were to buy a block of business. If she hires a new advisor, it would provide the assistance she needs in managing current accounts and it fits into her succession plan. Furthermore, Best could possibly purchase a block of business once the new advisor is trained as he or she could manage these clients.
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8B09B10
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A Marketing Plan
As Best, students are to create a (new) marketing plan. The case provides some guidance with regards to this marketing plan and a list of promotional alternatives.
A strong marketing plan will indentify the target market of the plan, the activities being pursued, and the key message being communicated, all to fit within the $14,500 budget for the upcoming fiscal year.
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The marketing plan also involves detail about the choice of radio stations for Linda Best’s feature. The current station she uses, The Fox, appears to best fit her target market; however, if the student’s proposed marketing plan does not use all of the budget, arguments could be made to add CHOK or K106.3 to Best’s marketing activities. One key learning point for this marketing plan is that new clients are seldom attracted to invest solely through promotional activity. This industry relies heavily on word-of-mouth and referrals. The implication behind this fact is that students should be cautious in choosing only those alternatives that are aimed at promoting Best Financial to the general population. Instead, the focus should be in reinforcing Linda Best’s knowledge and expertise and in retaining a satisfied base of current clients. Again, students may need to be “pushed” on the key message being communicated for each of their marketing expenses. Although students’ plans will vary widely, the following is a sample marketing plan:
tC
Client newsletter (twice per year) Client event (twice per year) Referral contest Radio feature
$ 1,300 3,200 2,500 7,500 $ 14,500
No
In this marketing plan, the newsletter and client event target current customers. These efforts aim to maintain a satisfied base of clients in order to increase word-of-mouth. The referral contest is the only true method of attracting new clients. Although the radio feature may draw in a few new clients, it targets current customers, thereby reinforcing Best’s position as an expert in the market. This strategy fits with industry analysis, which shows that consumers do not typically select a financial planner based on traditional marketing but rather based on the advice of friends and family. PROJECTED STATEMENTS
Do
Projected statements should be completed for fiscal 2009 since the alternatives will be implemented during the last half of fiscal 2008. The case states that in fiscal 2008, Best Financial will realize sales growth equal to only half of its previous period’s sales growth. Students will need to incorporate their individual decisions into their projected statements using the high and low scenarios. The projected financial statements reflecting the hiring of a new advisor are shown in Exhibits TN-4 and TN-5. As the statement of earnings shows, Best Financial would generate net earnings of over $112,000 in fiscal 2009’s high scenario. Although not a major increase over fiscal 2007, this option would still create positive growth for the company. The balance sheet continues to show a large amount of cash on hand, which is the plug figure. If students assumed that Best will continue to withdraw the company’s earnings through dividends, both the retained earnings and the cash balance would decrease significantly.
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8B09B10
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The projected financial statements reflecting the purchase of a block of business are shown in Exhibits TN6 and TN-7. As the statement of earnings shows, Best Financial would generate net earnings of over $130,000 in fiscal 2009. When projecting the balance sheet, students should use cash as a plug amount. If done correctly, the cash level is quite high; however, if Best continues to withdraw the company’s earnings through dividends, both the retained earnings and the cash balance would decrease significantly. WHAT HAPPENED
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As of September 2008, Linda Best had decided not to purchase the block of business. Further research on the financial advisor who was selling the client list showed a complaint filed against him with the FPSC. Best suspected that he was simply trying to make some money before he lost all his clients due to this complaint. The risk of taking on clients from an advisor who was accused of violating the CFP code of conduct was too much of a risk for Best.
Do
No
tC
Best was still considering hiring an additional advisor. She thought it was a logical step, given that she had no additional time as a result of her commitments to her current clients. She had not yet found the right person to hire since she was adamant about finding an advisor who suited the company and was willing to commit to the business for the long term.
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8B09B10
Exhibit TN-1
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STATEMENT OF CASH FLOWS For the year ending December 31, 2007
OPERATING ACTIVITIES Net Earnings Add: Amortization
$
1,279 (95)
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Marketable securities Accounts payable
$ 103,227 6,458 109,685
Net cash flow from operations
FINANCING ACTIVITIES Line of credit Dividends (see retained earnings below)
INVESTING ACTIVITIES Net long-term asset purchases (see below)
tC
No
Net Income
103,227
T/B
112,751
Dividends
106,177
E/B
6,574
3,642
Net Long-term Assets 29,647 O/B Amortization
6,458
23,189 T/B 4,829 Net Purchases 28,018 E/B
Do
9,524
(4,829)
$ 26,117
Ending cash
O/B
(102,398)
22,475
Beginning cash
Retained Earnings
110,869
3,779 (106,177)
Net cash flow from financing activities
Net cash flow
1,184
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8B09B10
Exhibit TN-2
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DIFFERENTIAL ANALYSIS –– HIRING A NEW ADVISOR For the year ending December 31, 2009
LOW $650,000
Inflows: Mutual fund sales commission1 Trailer revenue
$ 44,000
$ 35,500
Outflows: Salary Advisor bonus2 Marketing costs3
$ 37,000 1,500 2,372
Total outflows
$ 37,000 3,000 2,372 $ 42,372
$ 40,872
Recurring net cash flow
(5,372)
$
300 2,200 2,000 500 (231)
No
tC
Investments: One-time mailing Training Computer equipment Furnishings Accounts payable disinvestment4 Total investments
$ 40,000 4,000
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Total inflows
$ 32,500 3,000
HIGH $800,000
Return on investment
$
4,769
300 2,200 2,000 500 (231) $
4,769
(113%)
34%
(0.89)
2.93
Do
Payback (years)
$
1,628
1
Five per cent of total mutual funds sold. One per cent of amount above $500,000. 3 20 per cent increase over last year’s amount. 4 ($2,372 ÷ 360 days) × 35 days. 2
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8B09B10
Exhibit TN-3
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DIFFERENTIAL ANALYSIS –– BUYING A BLOCK OF BUSINESS For the year ending December 31, 2009
LOW
HIGH
70% Inflows: Trailer revenue1 Upfront commissions
$ 35,040
$ 27,087
Outflows: Receptionist wages2 Paper and postage Marketing Total outflows
$
3,525 350 900
$
$
3,525 435 1,100
4,775
$ 22,312
$ 49,900 5,000
tC
Recurring net cash flow Investments: Price of block Legal fees
$ 29,940 5,100
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Total inflows
$ 23,287 3,800
90%
Total investments
Return on investment
5,060
$ 29,980
$ 49,900 5,000
$ 54,900
$ 54,900
41%
55%
2.5
1.8
Do
No
Payback (years)
$
1 2
($49,900 ÷ 1.5) × 70%. 5 hours × $14.10/hour × 50 weeks/year.
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8B09B10
Exhibit TN-4
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PROJECTED STATEMENT OF EARNINGS –– NEW ADVISOR For the year ending December 31, 2009
REVENUE Revenue Sales from new advisor
(fiscal 2007 revenue × 104.95%) (from differential analysis)
(as per student's marketing budget) (same $ amount + $300) (same %) (same %) (eliminate if line of credit is paid off) (same %) (same %) (same $) (same $) (same $ amount + salary and bonus from differential) (same $) (same $) (same $ amount + $250 from new office equipment) (same $ amount + $2,200) (same %) (same %)
tC
OPERATING EXPENSES Advertising and promotion Delivery and Postage Fund management fees Insurance Interest expense Meals and travel Office supplies and maintenance Professional fees Rent Salaries and wages Utilities Agent error Amortization Education & training Miscellaneous Bank charges
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Total revenue
No
Total operating expenses Net earnings before tax Income tax
LOW
$ 348,595 44,000 $ 392,595
$ 348,595 35,500 $ 384,095
$
$
14,500 743 30,578 2,706 –– 9,855 18,424 2,605 17,460 146,996 5,116 80 6,708 3,444 1,332 121
14,500 743 30,578 2,706 –– 9,855 18,424 2,605 17,460 145,496 5,116 80 6,708 3,444 1,332 121
260,669
259,168
131,926 22,427
124,927 21,238
$ 109,499
$ 103,689
Do
Net Earnings After Tax
(17% from fiscal 2007 income statement)
HIGH
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Do
Total Liabilities & Shareholder’s Equity
Shareholder’s Equity Common Stock Retained Earnings Total Shareholder’s Equity
Liabilities Accounts Payable Line of Credit Total Liabilities
LIABILITIES & SHAREHOLDER’S EQUITY
Total Assets
Vehicle Less: Accumulated amortization, vehicle Total long-term assets
(same $ + fiscal 2007 NI + fiscal 2008 NI)
($14,500 marketing budget ÷ 360 days) × 35 days (may choose to pay off)
(same $) (same $ + fiscal 2008 amort. + fiscal 2009 amort.)
$
$ 270,710
7,171 14,720
7,549
$
1,410 0
23,905 16,734
45,590 38,041
$ 241,636 8,544
$ 264,900
7,171 14,720
7,549
$ 250,180
LOW
8B09B10
50,000 219,300
269,300
1,410
$ 270,710
$
50,000 213,490
263,490
1,410
$ 264,900
$
rP os t 1,410 0
23,905 16,734
45,590 38,041
$ 255,990
HIGH $ 247,446 8,544
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(same $ + new office equipment from differential) (same $ + fiscal 2008 amort. + fiscal 2009 amort.)
PLUG (same $)
tC
No Exhibit TN-5 PROJECTED BALANCE SHEET –– NEW ADVISOR As at December 31, 2009
Long-term assets Office equipment Less: Accumulated amortization, office equipment
Current assets Cash Marketable securities Total current assets
ASSETS
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8B09B10
Exhibit TN-6
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PROJECTED STATEMENT OF EARNINGS –– BUYING A BLOCK For the year ending December 31, 2009
REVENUE Revenue Sales from new advisor
(fiscal 2007 revenue × 104.95%) (from differential analysis)
(as per student's marketing budget) (same $ amount + $350) (same %) (same %) (eliminate if line of L.O.C. is paid off) (same %) (same %) (same $) (same $) (same $ amount + receptionist from differential) (same $) (same $) (same $) (same $ amount) (same %) (same %) (from differential
No
tC
OPERATING EXPENSES Advertising and promotion Delivery and Postage Fund management fees Insurance Interest expense Meals and travel Office supplies and maintenance Professional fees Rent Salaries and wages Utilities Agent error Amortization Education and training Miscellaneous Bank charges Legal fees
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Total revenue
HIGH
LOW
$ 348,595 35,040
$ 348,595 27,087
$ 383,635
$ 375,682
$
$
14,500 793 29,575 2,628 –– 9,632 18,007 2,605 17,460 112,021 5,116 80 6,450 1,244 1,302 118 5,000
14,500 793 29,145 2,574 –– 9,425 17,638 2,605 17,460 112,021 5,116 80 6,450 1,244 1,272 116 5,000
Total operating expenses
226,531
225,439
Net earnings before tax Income tax
157,104 26,708
150,243 25,541
$ 130,396
$ 124,702
Do
Net Earnings After Tax
(17% from fiscal 2007 income statement)
This document is authorized for use only by Balkrishna Parab until May 2013. Copying or posting is an infringement of copyright.
[email protected] or 617.783.7860.
This document is authorized for use only by Balkrishna Parab until May 2013. Copying or posting is an infringement of copyright.
[email protected] or 617.783.7860.
Vehicle Less: Accumulated amortization, vehicle Total long-term assets
Total Liabilities & Shareholder’s Equity
Shareholder’s Equity Common Stock Retained Earnings Total Shareholder’s Equity
Liabilities Accounts Payable Line of Credit Total Liabilities
LIABILITIES & SHAREHOLDER’S EQUITY
23,905 16,734
$
50,000 240,197
1,410 0
7,171
11,499
$ 264,393 8,544
HIGH
$ 272,937
$ 43,090 31,591
$ 285,913
1,410
$ 291,607
50,000 234,503
$
284,503
1,410
1,410 0
$ 285,913
18,670
$ 267,243
8B09B10
rP os t $
7,171
11,499
$ 258,699 8,544
LOW
290,197
$
$ 291,607
18,670
23,905 16,734
op yo
$ 43,090 31,591
tC
Long-term assets Office equipment Less: Accumulated amortization, office equipment
Total Assets
Exhibit TN-7
PROJECTED BALANCE SHEET –– BUYING A BLOCK As at December 31, 2009
No
Current assets Cash (PLUG) Marketable securities Total current assets
ASSETS
Do
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