acct questions
1.What are the pros and cons of B&Bs owners wanting to keep 100% control of their business? Identify at least 2 pros and 2 cons.2.Using the Excel template, input the assumptions highlighted in the case to create the following four pro forma financial statements:
1. Rent + 15% Growth
2. Rent + 0% Growth
3. Buy + 15% Growth
4. Buy + 0% Growth
3.What suggestions do you have for improving the assumptions and financial modeling for B&B?
Rent + 15% Growth
SDG Formula Driven
Bubble and Bee Organic – Pro Forma Modeling Template Input Required
Balance Sheet Income Statement
2013 2014 2015 2016 2017 2014 2015 2016 2017
Assets Revenues 1,776,168 – – –
Current Assets Cost of Goods Sold 357,597 – 0 – 0 – 0
Cash 25,567 43,008 169,184 169,184 169,184 Gross Margin 1,418,571 – – –
Receivables 32,375 35,525 – 0 – 0 – 0 Expenses
Inventories 131,250 143,937 – 0 – 0 – 0 Selling 439,512 – 0 – 0 – 0
Total Current Assets 189,192 222,470 169,184 169,184 169,184 General & Administrative Variable 82,514 – 0 – 0 – 0
Fixed Assets General & Administrative Fixed 572,776 – – –
PP&E 395,785 470,185 470,185 470,185 470,185 Depreciation 87,221 – – –
Less Depreciation 120,221 207,442 207,442 207,442 207,442 Total Expenses 1,182,023 – – –
Total Fixed Assets 275,564 262,743 262,743 262,743 262,743 EBIT 236,548 – – –
Net Interest Expense 7,535 – 0 – 0 – 0
Total Assets 464,756 485,213 431,927 431,927 431,927 Taxable Income 229,013 – – –
Taxes – – – –
Liabilities & Shareholder’s Equity Net Income 229,013 – – –
Current Liabilities Cash Flow Statement
Accounts Payable 44,625 53,286 – 0 – 0 – 0
Accrued Liabilities – – – – – Cash Provided (used) by Operations
Bank Loan 201,796 159,579 159,579 159,579 159,579 Net Income 229,013 – – –
Total Current Liabilities 246,421 212,865 159,579 159,579 159,579 Plus Depreciation 87,221 – – –
Long Term Liabilities – – – – – Change in Working Capital
Total Liabilities 246,421 212,865 159,579 159,579 159,579 Decrease (increase) in Receivables (3,150) 35,525 – –
Decrease (increase) in Inventory (12,687) 143,937 – –
Shareholder’s Equity Increase (decrease) in Accts. Payable 8,661 (53,286) – –
Member’s Equity 150,000 150,000 150,000 150,000 150,000 Increase (decrease) in Accrued Liabilities – – – –
Retained Earnings 68,335 122,348 122,348 122,348 122,348 Cash Provided (used) by Operations 309,058 126,176 – –
Total Shareholder’s Equity 218,335 272,348 272,348 272,348 272,348 Cash Provided (used) by Investments
Additions to PP&E (74,400) – – –
Total Liabilities and Shareholder’s Equity 464,756 485,213 431,927 431,927 431,927 Other Investments – 0 – – – N/A
Cash Provided (used) by Investments (74,400) – – –
Cash Provided (used) by Financing Activities
Assumptions 2014 2015 2016 2017 Additions (reductions) to Debt (42,217) – – – –
Revenue Growth -100% ERROR:#DIV/0! ERROR:#DIV/0! Net issues of Stock – 0 – – – –
Unit Demand 126,869 No No No (Dividends – Owner Draws) (175,000) – – – –
Average Selling Price $ 14.00 No No No Cash Provided (used) by Financing Activities (217,217) – – – –
COGS % as a % of Revenues No No No Net increase (decrease) in cash 17,441 126,176 – – –
Selling Expense as a % of Revenues No No No
General and Administrative Expense
Variable G&A as a % of Revenue No No No
Fixed G&A Expense No No No
Anticipated Annual Increase in G&A Fixed Expense Yes No No
Depreciation Expense
Existing Equipment 87,221 No No No
Building – 30 years Yes Yes Yes No building to depreciation
New Equipment – Yes No No
Total 87,221 – – –
Net Interest Expense Yes Yes Yes No debt (renting)
Tax Rate NA due to LLC Yes Yes Yes No corporate tax rate due to LLC
Receivables as a % of Revenues No No No
Inventory as a % of Revenues No No No
Accounts Payable as a % Revenues No No No
Accrued Liabilities % of Revenues Yes Yes Yes
Additions to PP&E Yes No Yes
Debt
Additions to Debt – Bank Loan Yes Yes Yes
(Reductions) to Debt – Bank Loan No Yes Yes
Additions to Debt – Long Term Debt Yes Yes Yes
(Reductions) to Debt – Long Term Debt Yes Yes Yes
Equity only financing Yes Yes Yes
Dividends – Owner Draws No No No
Good Good Good check figure
143,339 161,999 183,141
$ 14.25 $ 14.50 $ 14.75
20% 21% 21%
25% 26% 27%
5% 5% 5%
675,000 725,000 775,000
– 0 50,000 50,000
95,221 95,221 95,221
– – –
– 10,000 10,000
95,221 105,221 105,221
– – –
0% 0% 0%
2% 2% 2%
8% 8% 8%
4% 4% 4%
0% 0% 0%
– 100,000 –
– – –
(159,579) – –
– – –
– – –
– – –
(175,000) (175,000) (175,000)
Rent + 0% Growth
SDG Formula Driven
Bubble and Bee Organic – Pro Forma Modeling Template Input Required
Balance Sheet Income Statement
2013 2014 2015 2016 2017 2014 2015 2016 2017
Assets Revenues 1,776,168 – – –
Current Assets Cost of Goods Sold 357,597 – 0 – 0 – 0
Cash 25,567 43,008 169,184 169,184 169,184 Gross Margin 1,418,571 – – –
Receivables 32,375 35,525 – 0 – 0 – 0 Expenses
Inventories 131,250 143,937 – 0 – 0 – 0 Selling 439,512 – 0 – 0 – 0
Total Current Assets 189,192 222,470 169,184 169,184 169,184 General & Administrative Variable 82,514 – 0 – 0 – 0
Fixed Assets General & Administrative Fixed 572,776 – – –
PP&E 395,785 470,185 470,185 470,185 470,185 Depreciation 87,221 – – –
Less Depreciation 120,221 207,442 207,442 207,442 207,442 Total Expenses 1,182,023 – – –
Total Fixed Assets 275,564 262,743 262,743 262,743 262,743 EBIT 236,548 – – –
Net Interest Expense 7,535 – 0 – 0 – 0
Total Assets 464,756 485,213 431,927 431,927 431,927 Taxable Income 229,013 – – –
Taxes – – – –
Liabilities & Shareholder’s Equity Net Income 229,013 – – –
Current Liabilities Cash Flow Statement
Accounts Payable 44,625 53,286 – 0 – 0 – 0
Accrued Liabilities – – – – – Cash Provided (used) by Operations
Bank Loan 201,796 159,579 159,579 159,579 159,579 Net Income 229,013 – – –
Total Current Liabilities 246,421 212,865 159,579 159,579 159,579 Plus Depreciation 87,221 – – –
Long Term Liabilities – – – – – Change in Working Capital
Total Liabilities 246,421 212,865 159,579 159,579 159,579 Decrease (increase) in Receivables (3,150) 35,525 – –
Decrease (increase) in Inventory (12,687) 143,937 – –
Shareholder’s Equity Increase (decrease) in Accts. Payable 8,661 (53,286) – –
Member’s Equity 150,000 150,000 150,000 150,000 150,000 Increase (decrease) in Accrued Liabilities – – – –
Retained Earnings 68,335 122,348 122,348 122,348 122,348 Cash Provided (used) by Operations 309,058 126,176 – –
Total Shareholder’s Equity 218,335 272,348 272,348 272,348 272,348 Cash Provided (used) by Investments
Additions to PP&E (74,400) – – –
Total Liabilities and Shareholder’s Equity 464,756 485,213 431,927 431,927 431,927 Other Investments – 0 – – – N/A
Cash Provided (used) by Investments (74,400) – – –
Cash Provided (used) by Financing Activities
Assumptions 2014 2015 2016 2017 Additions (reductions) to Debt (42,217) – – – –
Revenue Growth -100% ERROR:#DIV/0! ERROR:#DIV/0! Net issues of Stock – 0 – – – –
Unit Demand 126,869 No No No (Dividends – Owner Draws) (175,000) – – – –
Average Selling Price $ 14.00 No No No Cash Provided (used) by Financing Activities (217,217) – – – –
COGS % as a % of Revenues No No No Net increase (decrease) in cash 17,441 126,176 – – –
Selling Expense as a % of Revenues No No No
General and Administrative Expense
Variable G&A as a % of Revenue No No No
Fixed G&A Expense No No No
Anticipated Annual Increase in G&A Fixed Expense Yes No No
Depreciation Expense
Existing Equipment 87,221 No No No
Building – 30 years Yes Yes Yes No building to depreciation
New Equipment – Yes No No
Total 87,221 – – –
Net Interest Expense Yes Yes Yes No debt (renting)
Tax Rate NA due to LLC Yes Yes Yes No corporate tax rate due to LLC
Receivables as a % of Revenues No No No
Inventory as a % of Revenues No No No
Accounts Payable as a % Revenues No No No
Accrued Liabilities % of Revenues Yes Yes Yes
Additions to PP&E Yes No Yes
Debt
Additions to Debt – Bank Loan Yes Yes Yes
(Reductions) to Debt – Bank Loan No Yes Yes
Additions to Debt – Long Term Debt Yes Yes Yes
(Reductions) to Debt – Long Term Debt Yes Yes Yes
Equity only financing Yes Yes Yes
Dividends – Owner Draws Yes Yes No
Good Good Good check figure
126,869 126,869 126,869
$ 14.25 $ 14.50 $ 14.75
20% 21% 21%
25% 26% 27%
5% 5% 5%
675,000 725,000 775,000
– 0 50,000 50,000
95,221 95,221 95,221
– – –
– 10,000 10,000
95,221 105,221 105,221
– – –
0% 0% 0%
2% 2% 2%
8% 8% 8%
4% 4% 4%
0% 0% 0%
– 100,000 –
– – –
(159,579) – –
– – –
– – –
– – –
– – (175,000)
Buy + 15% Growth
SDG Formula Driven
Bubble and Bee Organic – Pro Forma Modeling Template Input Required
Balance Sheet Income Statement
2013 2014 2015 2016 2017 2014 2015 2016 2017
Assets Revenues 1,776,168 – – –
Current Assets Cost of Goods Sold 357,597 – 0 – 0 – 0
Cash 25,567 43,008 169,184 169,184 169,184 Gross Margin 1,418,571 – – –
Receivables 32,375 35,525 – 0 – 0 – 0 Expenses
Inventories 131,250 143,937 – 0 – 0 – 0 Selling 439,512 – 0 – 0 – 0
Total Current Assets 189,192 222,470 169,184 169,184 169,184 General & Administrative Variable 82,514 – 0 – 0 – 0
Fixed Assets General & Administrative Fixed 572,776 – – –
PP&E 395,785 470,185 470,185 470,185 470,185 Depreciation 87,221 – – –
Less Depreciation 120,221 207,442 207,442 207,442 207,442 Total Expenses 1,182,023 – – –
Total Fixed Assets 275,564 262,743 262,743 262,743 262,743 EBIT 236,548 – – –
Net Interest Expense 7,535 – 0 – 0 – 0
Total Assets 464,756 485,213 431,927 431,927 431,927 Taxable Income 229,013 – – –
Taxes – – – –
Liabilities & Shareholder’s Equity Net Income 229,013 – – –
Current Liabilities Cash Flow Statement
Accounts Payable 44,625 53,286 – 0 – 0 – 0
Accrued Liabilities – – – – – Cash Provided (used) by Operations
Bank Loan 201,796 159,579 159,579 159,579 159,579 Net Income 229,013 – – –
Total Current Liabilities 246,421 212,865 159,579 159,579 159,579 Plus Depreciation 87,221 – – –
Long Term Liabilities – – – – – Change in Working Capital
Total Liabilities 246,421 212,865 159,579 159,579 159,579 Decrease (increase) in Receivables (3,150) 35,525 – –
Decrease (increase) in Inventory (12,687) 143,937 – –
Shareholder’s Equity Increase (decrease) in Accts. Payable 8,661 (53,286) – –
Member’s Equity 150,000 150,000 150,000 150,000 150,000 Increase (decrease) in Accrued Liabilities – – – –
Retained Earnings 68,335 122,348 122,348 122,348 122,348 Cash Provided (used) by Operations 309,058 126,176 – –
Total Shareholder’s Equity 218,335 272,348 272,348 272,348 272,348 Cash Provided (used) by Investments
Additions to PP&E (74,400) – – –
Total Liabilities and Shareholder’s Equity 464,756 485,213 431,927 431,927 431,927 Other Investments – 0 – – – N/A
Cash Provided (used) by Investments (74,400) – – –
Cash Provided (used) by Financing Activities
Assumptions 2014 2015 2016 2017 Additions (reductions) to Debt (42,217) – – –
Revenue Growth -100% ERROR:#DIV/0! ERROR:#DIV/0! Net issues of Stock – 0 – – –
Unit Demand 126,869 No No No (Dividends – Owner Draws) (175,000) – – –
Average Selling Price $ 14.00 No No No Cash Provided (used) by Financing Activities (217,217) – – –
COGS % as a % of Revenues No No No Net increase (decrease) in cash 17,441 126,176 – –
Selling Expense as a % of Revenues No No No
General and Administrative Expense New Loan
Variable G&A as a % of Revenue No No No Building Cost $ 1,100,000 LTV 90%
Fixed G&A Expense No No No New Loan Amount $ 990,000
Anticipated Annual Increase in G&A Fixed Expense Yes No No Interest Rate 5%
Depreciation Expense Annual Loan Payment $ 79,440
Existing Equipment 87,221 No No No
Building – 30 years No No No Payment Schedule
New Equipment – Yes No No Beginning Balance 990,000 960,060 928,623
Total 87,221 – – – Interest Rate 5% 5% 5%
Net Interest Expense No No No Interest 49,500 48,003 46,431
Tax Rate NA due to LLC Yes Yes Yes No corporate tax rate due to LLC Principle 29,940 31,437 33,009
Receivables as a % of Revenues No No No Ending Balance 960,060 928,623 895,614
Inventory as a % of Revenues No No No Loan Payment 79,440 79,440 79,440
Accounts Payable as a % Revenues No No No
Accrued Liabilities % of Revenues Yes Yes Yes
Additions to PP&E No No Yes
Debt
Additions to Debt – Bank Loan Yes Yes Yes
(Reductions) to Debt – Bank Loan No Yes Yes
Additions to Debt – Long Term Debt No Yes Yes
(Reductions) to Debt – Long Term Debt No No No
Equity only financing Yes Yes Yes
Dividends – Owner Draws Yes No No
Good Good Good check figure
143,339 161,999 183,141
$ 14.25 $ 14.50 $ 14.75
20% 21% 21%
25% 26% 27%
5% 5% 5%
600,000 650,000 700,000
– 0 50,000 50,000
95,221 95,221 95,221
36,667 36,667 36,667
– 10,000 10,000
131,888 141,888 141,888
49,500 48,003 46,431
0% 0% 0%
2% 2% 2%
8% 8% 8%
4% 4% 4%
0% 0% 0%
1,100,000 100,000 –
– – –
(159,579) – –
990,000 – –
(29,940) (31,437) (33,009)
– – –
– (175,000) (175,000)
Buy + 0% Growth
SDG Formula Driven
Bubble and Bee Organic – Pro Forma Modeling Template Input Required
Balance Sheet Income Statement
2013 2014 2015 2016 2017 2014 2015 2016 2017
Assets Revenues 1,776,168 – – –
Current Assets Cost of Goods Sold 357,597 – 0 – 0 – 0
Cash 25,567 43,008 169,184 169,184 169,184 Gross Margin 1,418,571 – – –
Receivables 32,375 35,525 – 0 – 0 – 0 Expenses
Inventories 131,250 143,937 – 0 – 0 – 0 Selling 439,512 – 0 – 0 – 0
Total Current Assets 189,192 222,470 169,184 169,184 169,184 General & Administrative Variable 82,514 – 0 – 0 – 0
Fixed Assets General & Administrative Fixed 572,776 – – –
PP&E 395,785 470,185 470,185 470,185 470,185 Depreciation 87,221 – – –
Less Depreciation 120,221 207,442 207,442 207,442 207,442 Total Expenses 1,182,023 – – –
Total Fixed Assets 275,564 262,743 262,743 262,743 262,743 EBIT 236,548 – – –
Net Interest Expense 7,535 – 0 – 0 – 0
Total Assets 464,756 485,213 431,927 431,927 431,927 Taxable Income 229,013 – – –
Taxes – – – –
Liabilities & Shareholder’s Equity Net Income 229,013 – – –
Current Liabilities Cash Flow Statement
Accounts Payable 44,625 53,286 – 0 – 0 – 0
Accrued Liabilities – – – – – Cash Provided (used) by Operations
Bank Loan 201,796 159,579 159,579 159,579 159,579 Net Income 229,013 – – –
Total Current Liabilities 246,421 212,865 159,579 159,579 159,579 Plus Depreciation 87,221 – – –
Long Term Liabilities – – – – – Change in Working Capital
Total Liabilities 246,421 212,865 159,579 159,579 159,579 Decrease (increase) in Receivables (3,150) 35,525 – –
Decrease (increase) in Inventory (12,687) 143,937 – –
Shareholder’s Equity Increase (decrease) in Accts. Payable 8,661 (53,286) – –
Member’s Equity 150,000 150,000 150,000 150,000 150,000 Increase (decrease) in Accrued Liabilities – – – –
Retained Earnings 68,335 122,348 122,348 122,348 122,348 Cash Provided (used) by Operations 309,058 126,176 – –
Total Shareholder’s Equity 218,335 272,348 272,348 272,348 272,348 Cash Provided (used) by Investments
Additions to PP&E (74,400) – – –
Total Liabilities and Shareholder’s Equity 464,756 485,213 431,927 431,927 431,927 Other Investments – 0 – – – N/A
Cash Provided (used) by Investments (74,400) – – –
Cash Provided (used) by Financing Activities
Assumptions 2014 2015 2016 2017 Additions (reductions) to Debt (42,217) – – –
Revenue Growth -100% ERROR:#DIV/0! ERROR:#DIV/0! Net issues of Stock – 0 – – –
Unit Demand 126,869 No No No (Dividends – Owner Draws) (175,000) – – –
Average Selling Price $ 14.00 No No No Cash Provided (used) by Financing Activities (217,217) – – –
COGS % as a % of Revenues No No No Net increase (decrease) in cash 17,441 126,176 – –
Selling Expense as a % of Revenues No No No
General and Administrative Expense New Loan
Variable G&A as a % of Revenue No No No Building Cost $ 1,100,000 LTV 90%
Fixed G&A Expense No No No New Loan Amount $ 990,000
Anticipated Annual Increase in G&A Fixed Expense Yes No No Interest Rate 5%
Depreciation Expense Annual Loan Payment $ 79,440
Existing Equipment 87,221 No No No
Building – 30 years No No No Payment Schedule
New Equipment – Yes No No Beginning Balance 990,000 960,060 928,623
Total 87,221 – – – Interest Rate 5% 5% 5%
Net Interest Expense No No No Interest 49,500 48,003 46,431
Tax Rate NA due to LLC Yes Yes Yes No corporate tax rate due to LLC Principle 29,940 31,437 33,009
Receivables as a % of Revenues No No No Ending Balance 960,060 928,623 895,614
Inventory as a % of Revenues No No No Loan Payment 79,440 79,440 79,440
Accounts Payable as a % Revenues No No No
Accrued Liabilities % of Revenues Yes Yes Yes
Additions to PP&E No No Yes
Debt
Additions to Debt – Bank Loan Yes Yes Yes
(Reductions) to Debt – Bank Loan No Yes Yes
Additions to Debt – Long Term Debt No Yes Yes
(Reductions) to Debt – Long Term Debt No No No
Equity only financing Yes Yes Yes
Dividends – Owner Draws Yes Yes Yes
Good Good Good check figure
126,869 126,869 126,869
$ 14.25 $ 14.50 $ 14.75
20% 21% 21%
25% 26% 27%
5% 5% 5%
600,000 650,000 700,000
– 0 50,000 50,000
95,221 95,221 95,221
36,667 36,667 36,667
– 10,000 10,000
131,888 141,888 141,888
49,500 48,003 46,431
0% 0% 0%
2% 2% 2%
8% 8% 8%
4% 4% 4%
0% 0% 0%
1,100,000 100,000 –
– – –
(159,579) – –
990,000 – –
(29,940) (31,437) (33,009)
– – –
– – –
Good Good Good
