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Exhibit No.1 Toy World, Inc.

's Pro-Forma Balance Sheet under Level Production, 1994 (thousands of dollars)
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
Cash 628 816 200 200 200 200 200 200 200 200 200 200
Account receivablea 1,060 260 300 300 280 280 300 1,780 3,460 3,980 4,425 3,400
Inventoryb 1,050 1,502 1,940 2,391 2,843 3,294 3,733 3,220 2,565 1,714 769 586
Current Assets 2738 2578 2440 2891 3323 3774 4233 5200 6225 5894 5394 4186
Net plant & equipment 1,176 1,176 1,176 1,176 1,176 1,176 1,176 1,176 1,176 1,176 1,176 1,176
Total assets 3914 3754 3616 4067 4499 4950 5409 6376 7401 7070 6570 5362

Account payalec 250 250 250 250 250 250 250 250 250 250 250 250
Notes payable, bankd 0 0 106 760 1,367 2,060 2,700 3,341 4,000 3,159 2,087 764
Accrued taxese 30 (24) (165) (257) (316) (413) (474) (364) (263) (89) 105 130
Long-T-debt current portion 50 50 50 50 50 50 50 50 50 50 50 50
Current liabilities 330 276 241 803 1351 1947 2526 3277 4037 3370 2492 1194
Long-term debt 400 400 400 400 400 375 375 375 375 375 375 350
shareholders' equityf 3,184 3,078 2,975 2,864 2,748 2,628 2,508 2,724 2,989 3,325 3,703 3,818
Total liabilities & equity 3914 3754 3616 4067 4499 4950 5409 6376 7401 7070 6570 5362

a
Assumes a 60-day collection period.
b
From Exhibit No-4.
c
Assume a 30-day payment period. December 31balance paid in january and constant balance maintained thereafter at the level of one month's purchases.
d
Figure plugged as the difference between assets and all sources of funds except bank notes.
e
See footnote (g) to case Exhibit 1, and Exhibit No-5.
f
The Changes are based on the monthly profit figures from the pro forma income statement in Exhibit No-2.

Exhibit No-2 Toy World, Inc.'s Pro Forma Income Statement under Level Production, 1994 (thousands of dollars)

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Total
Net Sales 120 140 160 140 140 140 160 1,620 1,840 2,140 2,285 1,115 10,000
Cost of goods solda 78 91 104 91 91 91 104 1,055 1,198 1,393 1,488 726 6,510
Gross profit 42 49 56 49 49 49 56 565 642 747 797 389 3,490

Operationg Expensesb 205 207 209 211 213 215 217 214 211 208 203 202 2,515
Interest Expense 7 4 4 7 12 17 21 26 31 30 23 14 196
Interest Income 1 2 1 1 1 1 1 1 1 1 1 1 13
-171 -164 -158 -170 -177 -184 -183 324 399 508 570 172 766
Income taxesc -58 -56 -54 -58 -60 -63 -62 110 136 173 194 58 260
Net Profit -229 -220 -212 -228 -237 -247 -245 214 263 335 376 114 506
a
65.10% of sales, reflecting labor saving of $490,000. Assumes a constant gross margin in each month.
b
Operating expenses of $ 2,400,000 are assumed evenly distributed throughout the year. The $115,000 of increased storage and handling costs are allocated to each month
on the basis of the amount of inventory at the end of the month as a percent of the sum of the ending inventory figures for all 12 months.
c
Assumed 34% tax rate./ One can also state that because of losses, no income tax is payable when there is a loss

Exhibit No-3 Cash Budget under Level production, 1994 (thousands of dollars)

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
Inflows
Collections 1,965 940 120 140 160 140 140 140 160 1,620 1,840 2,140
After-tax interest income 1 2 1 1 1 1 1 1 1 1 1 1
Total 1,966 942 121 141 161 141 141 141 161 1,621 1,841 2,141
Outflows
Payments of account payable 282 250 250 250 250 250 250 250 250 250 250 250
Tax payments 0 0 88 35 0 35 0 0 35 0 0 34
Repayment of long-term debt 0 0 0 0 0 25 0 0 0 0 0 25
Operating expenses 205 207 209 211 213 215 217 214 211 208 203 202
Interest expenses 7 4 4 7 12 17 21 26 31 30 23 14
wages 292 293 292 292 293 292 293 292 293 292 293 293
Total 786 754 843 795 768 834 781 782 820 780 769 818
Net inflow (outflow) 1,180 188 -722 -654 -607 -693 -640 -641 -659 841 1,072 1,323
Beginning Cash 200 628 816 200 200 200 200 200 200 200 200 200
Ending cash before any loan
increase or repayment 1,380 816 94 -454 -407 -493 -440 -441 -459 1,041 1,272 1,523
Desired cash balance 200 200 200 200 200 200 200 200 200 200 200 200
Loan (repayment) increase (752) 0 106 654 607 693 640 641 659 -841 -1,072 -1,323
End-of-month loan 0 0 106 760 1,367 2,060 2,700 3,341 4,000 3,159 2,087 764
End of month Cash Balance 628 816 200 200 200 200 200 200 200 200 200 200
Exhibit No-4 Schedule of Changes Affecting inventory,
Finished1994Finished
(thousands of dollars)
Goods
Finished Goods Cost of Goods Goods Net Beginning of Finished Goods
Month Completed sold a
Change Month End of the Month
January $542 78 $464 586 1,050
February 543 91 $452 1,050 1,502
March 542 104 $438 1,502 1,940
April 542 91 $451 1,940 2,391
May 543 91 $452 2,391 2,843
June 542 91 $451 2,843 3,294
July 543 104 $439 3,294 3,733
August 542 1,055 ($513) 3,733 3,220
September 543 1,198 ($655) 3,220 2,565
October 542 1,393 ($851) 2,565 1,714
November 543 1,488 ($945) 1,714 769
December 543 726 ($183) 769 586
a
At 65.10% of sales,
Accrued reflecting
Taxes$ 490,000 Labor Savings. Assumes a Constant Gross margin in each month.
Taxes Payable
Exhibit No-5 Calculation
From priorof Accrued Taxes in
on profits for 1994 (thousandsAccrued
of dollars)
Taxes at
Month month Month a
Taxes Paid b
End of Month
January 88 (58) 0 30
February 30 (56) 0 (26)
March (26) (54) 88 (168)
April (168) (58) 35 (261)
May (261) (60) 0 (321)
June (316) (63) 35 (413)
July (413) (62) 0 (475)
August (475) 110 0 (365)
September (365) 136 35 (264)
October (264) 174 0 (90)
November (90) 194 0 104
December 104 59 34 129
From Exhibir No-2
a
b
From footnote g, case Exhibit 1.
c
From case Exhibit 1.