Question - You and your colleagues have just purchased the Leap Forward Placement Agency (LFPA). You own 100% of the shares of LFPA. To provide your company with some financial flexibility you are approaching a bank for a bank loan of $500,000. Accordingly you need to prepare a financial information package for the bank that includes:
1. A balance sheet, income statement and statement of retained earnings for LFPA for 2015 and 2016. When you purchased LFPA, you were provided with the financial data but it is disorganized and has not been put into financial statement format.
2. A financial statement analysis of the 2015 and 2016 data complete with a horizontal analysis, a vertical analysis and the appropriate financial statement ratios. Some ratios from the placement and recruiting industry have been supplied.
3. A cash budget and projected income statement for 2017 for LFPA. To assist with this you may wish to prepare additional supporting schedules like a sales budget, a cash receipts budget, a direct wages budget and a cash disbursements budget
4. A cost volume profit analysis for 2017 that identifies
a. which expenses are fixed and which expenses are variable - note some expenses are mixed and therefore need to be split into their variable and fixed components,
b. the breakeven point in number of placements and dollars
c. the number of placements that are required to be sold to generate an after tax profit of $200,000, of $400,000 and of $600,000. Assume a tax rate of 25%.
d. If sales in 2018 are projected to increase by 10% from 2017 what will the percentage increase in income before taxes from 2017 to 2018 be?
5. A qualitative report that includes:
a. An executive summary of your financial package for the bank manager with an overview of the information/analysis that you supplied, key highlights from your analysis and a conclusion on why the bank should grant you the loan. Make sure you are presenting the information with your objective in mind (you want the bank to give you a loan).
b. A qualitative interpretation of each type of analysis done - what does the analysis tell you and how does it help or hinder LFPA from being a good applicant for the loan.
6. A presentation to the bank manager (your classmates will act as the bank manager and listen to and evaluate your presentation.