Stonyfield Balance Sheet 1992-4

Stonyfield Balance Sheet 1992-4

USE OF INTEREST TO CREATE POSITIVE LEVERAGE

COMPANY A COMPANY B• SALES $40 M $40 • EXPENSES ($30 M) ($30) • EBITDA $10 M $10 M • INTEREST 0 ($4) • TAXABLE • EARNINGS $10 M $6 M • TAXES @40% ($4) M ($2.4 M) •   • AFTER TAX • EARNINGS $6 M $3.6 M •   • Total Asset 100M 100M • Return on Assets 6% 3.6% • Shareholder Equity 100M 50 M • Return on Equity 6% 7.2%

Depreciation• Depreciation = loss of value of a tangible asset over its

lifetime.• What is included: Significant items in a business

operation whose useful life extends beyond the current year. Examples:

• Furniture and Equipment• Buildings, factories and their machinery• Computers• Allocation of loss: Determined by a IRS (Internal

Revenue Service ) schedule, usually:• 5-7 years for furniture, equipment and computers• 40 years for buildings unless specialized in which case

building components can be broken out

Amortization• Amortization= loss of value of an intangible asset over

its lifetime• What is included: Items that are associated with a trade

or business and are not physical objects (except software discs). Examples:

• Goodwill- Goodwill is the name given to the differential between the sum of the actual values assigned to the assets purchased and the total purchase price. This typically occurs when one business buys another

• Trademarks, copyrights and patent rights• Software, software codes and discs• Allocation of loss:

– Usually over a period of 15 years

Receivables

Period 1st 2nd 3rd 4th

Receivables to start (beginning of period)

10 16 21 24

Sales 100 110 120 120

Collected from

This period90 99 108 108

Collected from Prior period

4 6 9 9

Total Net 94 105 117 117

Receivables End of Period

16 21 24 27