1. Given the assumptions that Jantz and Palmer have made, prepare a pro forma income statement and balance sheet for 2014. Assume that the line of credit provided by the bank will be needed for the full year.
2. Using the financial ratios presented in Chapter 10, compare Ashley Palmer’s ratios over time, including the pro forma ratios for 2014. If the bank requires a current ratio of at least 1.5 and a debt ratio not to exceed 55 percent, can the owners expect to be able to honor these covenants?
3. Prepare a statement of cash flows for 2013 and the 2014 projections. What did you learn from these statements?