Friendly Cards, Inc.

Statement of the problem:

Amy McConville, a friend and financial consultant of Wendy Beaumont, the president of Friendly Cards Inc., needs to come up with some suggestions concerning the financing of Friendly's expansion. Amy has been doing research on the firm and money is tight right now. The cost of financing growth right now is high and Friendly Card's is projecting 20% growth in sales next year and even more the following year. The company has never been without financing problems. The business is capital intensive and has had to rely on its good relations with its banks and suppliers to achieve success. Friendly's bankers have begun to feel uneasy about how much the company is relying on debt capital
Assets
Cash $200 $370 $240 $250 $250 $250
Notes & Accounts receivable 2,920 5,883 7,013 8,385 9,998 12,040 43% proj of sales
Inventory 2,500 3,708 5,588 6,630 7,905 9,520 34% proj of sales
Prepaid expenses 43 117 192 195 232 280 1% proj of sales
Total current assets $5,663 $10,078 $13,033 $15,460 $18,385 $22,090
Net Fixed Assets 903 2,208 2,433 2,925 3,488 4,200 15% proj of sales
Other assets 184 907 892 905 905 905
Total assets $6,750 $13,193 $16,358 $19,290 $22,778 $27,195 Liabilities and Owners' Equity
Current liabilities
Bank Loans $2,323 $4,350 $6,070 $7,586 $9,321 $11,404
Accounts & notes payable 1,503 2,748 3,057 3,705 4,417 5,320 19% proj of sales
Accruals 332 683 1,231 1,462 1,744 2,100 7.5% proj of sales
Current portion, long-term debt 117 350 433 450 450 450
Other 0 187 246 250 250 250
Total current liabilities $4,275 $8,318 $11,037 $13,453 $16,182 $19,524
Long-term debt 787 2,752 2,458 2,008 1,558 1,108
Total liabilities $5,062 $11,070 $13,495 $15,461 $17,740 $20,632 Owners' equity
Common stock 53 55 58 58 58 58
Paid in Capital 740 763 815 815 815 815
Retained earnings 895 1,305 1,990 2,956 4,165 5,690
Total owners' equity $1,688 $2,123 $2,863 $3,829 $5,038 $6,563
Total liabilities and net worth $6,750 $13,193 $16,358 $19,290