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acct questions

1.What are the pros and cons of B&B’s 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

+ 1
5%
Growth

Pro Forma Modeling Template

2014 2015 2016 2017

– – –

s Sold

– 0 – 0

169,184 169,184

– – –

– 0 – 0 – 0

169,184 169,184 169,184

– 0 – 0 – 0

– – –

470,185 470,185 470,185

– – –

207,442 207,442 207,442

– – –

262,743 262,743 262,743

– – –

Expense

– 0 – 0 – 0

431,927 431,927

– – –

– – – –

229,013 – – –

– 0 – 0 – 0

– – – – –

159,579 159,579 159,579 Net Income 229,013 – – –

159,579 159,579 159,579

87,221 – – –

– – – – –

246,421 212,865 159,579 159,579 159,579

35,525 – –

143,937 – –

Shareholder’s Equity

– –

150,000 150,000 150,000

– – – –

122,348 122,348 122,348 Cash Provided (used) by Operations

– –

272,348 272,348 272,348

– – –

464,756 485,213 431,927 431,927 431,927

– 0 – – –

Cash Provided (used) by Investments (74,400) – – –

2014 2015 2016 2017

– – – –

ERROR:#DIV/0!

– 0 – – – –

No No

)

– – – –

No No No Cash Provided (used) by Financing Activities

– – – –

No No No

126,176 – – –

No No No

No No

87,221 No No No

Yes Yes Yes

– Yes No No

87,221 – – –

Yes Yes Yes

No No No

Yes Yes Yes

Additions to PP&E Yes No Yes
Debt

Yes Yes Yes

No Yes Yes

Yes Yes Yes

Dividends – Owner Draws No No No
Good Good Good

21%

5% 5% 5%
– 0 50,000 50,000

95,221 95,221

– – –

–

10,000

95,221

105,221

– – –

0% 0% 0%

2% 2%

8% 8%

4% 4%

0% 0% 0%

–

– – –

– –

– – –
– – –
– – –

(175,000) (175,000) (175,000)

			SDG			Formula Driven
Bubble and Bee Organic																																–	Input Required
			Balance Sheet			Income Statement
			2013								2014				2015					2016				2017
			Assets			Revenues		1,776,168
			Current Assets	Cost of									Good	357,597													– 0
			Cash			25,567		43,008										169,184		Gross Margin		1,418,571
			Receivables			32,375					35,525		Expenses
			Inventories			131,250					143,937		Selling	439,512
			Total Current Assets			189,192		222,470			General & Administrative Variable		82,514
			Fixed Assets			General & Administrative Fixed		572,776
			PP&E			395,785								470,185	Depreciation							87,221
			Less Depreciation			120,221								207,442	Total Expenses		1,182,023
			Total Fixed Assets			275,564								262,743	EBIT		236,548
		Net		Interest			7,535
			Total Assets					464,756					485,213									431,927	Taxable Income		229,013
			Taxes
Liabilities &				Shareholder’s Equity					Net Income
			Current Liabilities			Cash Flow Statement
			Accounts Payable			44,625		53,286
			Accrued Liabilities					Cash Provided (used) by Operations
			Bank Loan			201,796																	159,579
			Total Current Liabilities					246,421					212,865	Plus Depreciation
			Long Term Liabilities			Change in Working Capital
			Total Liabilities			Decrease (increase) in Receivables		(3,150)
			Decrease (increase) in Inventory			(12,687)
			Increase (decrease) in Accts. Payable			8,661		(53,286)
			Member’s Equity				1					50,000					150,000	Increase (decrease) in Accrued Liabilities
			Retained Earnings			68,335								122,348	309,058			126,176
			Total Shareholder’s Equity			218,335								272,348			Cash Provided (used) by Investments
						Additions to PP&E					(74,400)
			Total Liabilities and Shareholder’s Equity			Other Investments		N/A
						Cash Provided (used) by Financing Activities
			Assumptions	Additions (reductions) to			Debt		(42,217)
			Revenue Growth	-10												0%			ERROR:#DIV/0!		Net issues of Stock
			Unit Demand							126,869																		No	(	Dividends – Owner Draws	(175,000)
			Average Selling Price			$ 14.00		(217,217)
			COGS % as a % of Revenues			Net increase (decrease) in cash		17,441
			Selling Expense as a % of Revenues
			General and Administrative Expense
			Variable G&A as a % of Revenue
			Fixed G&A Expense
			Anticipated Annual Increase in G&A Fixed Expense																							Yes
			Depreciation Expense
			Existing Equipment
			Building – 30 years		No building to depreciation
			New Equipment
			Total
			Net Interest Expense		No debt (renting)
			Tax Rate NA due to LLC			No corporate tax rate due to LLC
			Receivables as a % of Revenues
			Inventory as a % of Revenues
			Accounts Payable as a % Revenues
			Accrued Liabilities % of Revenues
			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
			check figure
	143,339		161,999		183,141
			$ 14.25			$ 14.50		$ 14.75
			20%					21%
			25%			26%		27%
	675,000		725,000		775,000
										95,221
						10,000
			105,221
								2%
								8%
								4%
			100,000
			(159,579)

Rent + 0% Growth

SDG Formula Driven

Input Required

Balance Sheet Income Statement
2013 2014 2015 2016 2017 2014 2015 2016 2017

Assets Revenues 1,776,168 – – –

Current Assets

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 – – – –

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

(42,217) – – – –
Revenue Growth

ERROR:#DIV/0! ERROR:#DIV/0! Net issues of Stock – 0 – – – –
Unit Demand 126,869 No No No

(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 – – –

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)

Bubble and Bee Organic – Pro Forma Modeling Template

Cost of Goods Sold

Liabilities & Shareholder’s Equity

Additions (reductions) to Debt

-100%

(Dividends – Owner Draws)

Net Interest Expense

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

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 No No No

New Equipment – Yes No No

990,000

Total 87,221 – – – Interest Rate 5% 5% 5%
Net Interest Expense No No No Interest

Tax Rate NA due to LLC Yes Yes Yes No corporate tax rate due to LLC

Receivables as a % of Revenues No No No

960,060 928,623

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%

– 0 50,000 50,000

95,221 95,221 95,221

36,667 36,667

– 10,000 10,000

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 – –

– – –

– (175,000) (175,000)

	New Loan
	Building Cost	$		1,100,000		LTV		90%
	New Loan Amount	$				990,000
			Interest Rate
Annual		Loan Payment	$						79,440
	Payment Schedule
	Beginning Balance				960,060				928,623
			49,500				48,003			46,431
	Principle		29,940		31,437		33,009
	Ending Balance		895,614
	600,000		650,000		700,000
					36,667
	131,888				141,888
	(29,940)		(31,437)		(33,009)

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

LTV 90%
Fixed G&A Expense No No No New Loan Amount

Anticipated Annual Increase in G&A Fixed Expense Yes No No Interest Rate 5%
Depreciation Expense

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

$ 1,100,000

$ 990,000

Annual Loan Payment

$ 79,440

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+ 1
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