Wilmot Shirts is a t-shirt distributor selling its unique line of t-shirts to large department stores.

The year of
focus is 2010.

0. Through an annual promotional program, Wilmot Shirts was able to offer a slight discount products in
exchange for full cash payment at time of sale. Everyone signed up for the entire annual promotion. (no
recivables)
1. In 2010 the company increased revenue by 25% over 2009. Its gross margin percentage and cash
operating expenses (Sales and Marketing, G&A, R&D), as a percent of revenue, remained consistent from 2009
through 2010.
2. During the year the company purchased $100,000 worth of computers. The purchase happened on
January 1, 2010 and it was expected that the computers would last for three years, (straight line depreciation).
Prior to the purchase, depreciation was expected to be only $14,000 for the year.
3. On December 31, 2008 the company had closed on a three-year bank loan for $100,000. There was no
intended schedule paydown on the loan in 2008, 2009 or 2010. However, on July 1, 2010 the bank notified
Wilmot Shirt that the entire loan was going to be due and payable on December 31, 2010. It appeared that the
bank had the legal right to call the note up to one year early if it desired. The loan carried an annual interest
rate of 5% which was payable at the end of each year.
4. Wilmot Shirts pays 40% income tax to Federal and State government authorities. Also, at the end of
each year Wilmot Shirts customarily distributes $100,000 of dividend to its founder, Rich Wilmot. Its other
investors have agreed to this because Mr. Wilmot receives an annual dividend in lieu of salary, and only takes
the dividend if Wilmot Shirts has profits at the end of the year in question.
5. In November 2010 a large department retail store returned three shipments of t-shirts to Wilmot
Shirts. This, in combination with inventory expenditures during the fourth quarter, left the company with
$400,000 of inventory on its books at the end of the year. The inventory as of December 31, 2010 was now
over 5X that in 2009.
6. Wilmot Shirts sourced its inventory from overseas manufacturers. Its last t-shirt order of $100,000 was
received, but payment will not be due until January 31, 2011. In addition, Wilmot Shirts owed $125,000 to a
marketing advertising firm for consulting services performed. Payment is due by January 15, 2011.
7. There were no other changes to Wilmot Shirt's current assets and current liabilities between December
31, 2009 and December 31, 2010. However, the company did want to execute a stock buy-back from its
investors to alleviate future dilution to its founder. Prior to making the buy-back offer the founder, Rich
Wilmot, needed to calculate the company's cash flow, cash on the balance sheet at the end of 2010, and an
estimate of 2011 cash needs. Rich Wilmot believed that under no circumstances could he afford to let cash on
the balance sheet, after the buy-back, be less than that of 2009. Rich expected that the buy-back negotiations
would be resolved in early January.
 Income Statement-Wilmot Shirts
           
  2009   2010   Notes
         
$
Revenue 1,250,000    1,562,500    increased revenue by 25% over 2009
         
Beginning Inventory 175,000    75,000    
Purchases 400,000    950,000    
Total Goods Avail Sale 575,000    1,025,000    
Ending Inventory 75,000    400,000    
         
Cost of Goods Sold $ 500,000    625,000    Gross Margin =(Rev-COG)/Rev
         
Gross Profit $ 750,000    937,500    60 % of revenue
         
Operating Expenses          
Research &
Development 25,000   31,250    2% of Revenue
Sales & Marketing 75,000   93,750    6% of Revenue
General & Administrative 125,000   156,250    10% of Revenue
         
TOTAL OPERATING $ 225,000    281,250    
         
EBITDA $ 525,000    656,250    
         
Depreciation 14,000    47,333.3    (3333.3+14000)
Amortization -        
Earnings Before Int/Tax $ 511,000    608,916.7    
Interest (net) 5,000    5,000    
         
Net Income Before Tax $ 506,000    603,916.7    
Taxes 202,400    241,566.68    
           
Net Income $ 303,600    362,350.02    
Dividends $ 100,000    100,000    
 Balance Sheet -Wilmot Shirts
           
2009   2010   Notes
ASSETS      
CURRENT ASSETS      
$
Cash 175,000 284,683.3  
Receivables 215,000 0
Inventory 75,000  400,000  
Marketable Securities 20,000  20,000  
       
$
TOTAL CURRENT ASSETS 485,000  704,683.3  
       
LONG-TERM ASSESTS      
$
Property Plant and Equipment 245,000  345,000  Added 100 k in computers
Accumulated Depreciation 74,000  121,333.3  
       
$
TOTAL FIXED ASSETS 171,000  223,666.7  
       
Intangibles $ 0  0  
Accumulated Amortization $ 0  0  
       
NET INTANGIBLES $ 0  0  
$
TOTAL LONG-TERM ASSETS 171,000  223,666.7  
       
$
TOTAL ASSETS 656,000  928,350  
   
LIABILITIES AND EQUITY      
CURRENT LIABILITIES      
$
Accounts Payable 115,000  225,000  
Short-Term Debt $ 0  0  
Other Current $ 20,000  20,000  
       
$
TOTAL CURRENT 135,000  245,000  
       
$
Long Term Debt 100,000  0  
       
$
TOTAL LIABILITIES 235,000  245,000  
       
$
Preferred Stock 125,000  125,000  
Common Stock $ 50,000  50,000  
$
Retained Earnings 246,000  508,350  RE+NI-100,000 (div)
       
$
TOTAL STOCKHOLDER EQUITY 421,000  683,350  
   
$
TOTAL LIABILITIES AND EQUITY 656,000  928,350  

Cash Flow Statement- Wilmot Shirts

2010   Notes
Cash Flow from Operations    
     
Net Income   362,350.02  
Depreciation  47,333.3  
     
Working Capital Changes    
Accounts Receivable  215,000  
Inventory  (325,000)  
Other Current Assets  0  
Accounts Payable  110,000  
     
Total Cash Flow from Operations  409,683.32  
     
Cash Flow from Investments
     
Purchase of PP&E  (100,000)  
Acquisition of Businesses  0  
Sale of Assets  0  
     
Total Cash Flow from Investments  (100,000)  
     
Cash Flow from Financing
Issuance (payback) of debt  (100,000)  
Issuance (buyback) of equity    
Dividends  (100,000)  
     
Total Cash Flow from Financing  (200,000)  
     
Total Cash Flow  109,683.33  
     
Beginning Cash Flow  175,000  
     
Ending Cash Flow  284,683.33