Cash Flow Exercise:

Fill in the missing information in the table below using the information provided. Use the table on p. 3-10 of the Participants Manual (textbook) as a guide. If you dont see a line item in the table, assume these accounts dont exist. Be sure to indicate whether each item is positive (increase in cash) or negative (decrease in cash).

	12/31/19 Balance	12/31/20 Balance	Income Statement	Cash Impact	Subtotal
Net Sales	X	X	1,750,000	1,750,000	1,750,000
Accounts Rec	250,000	300,000	X	(50,000)
CASH FROM SALES	X	X	X	X
Cost of Goods Sold	X	X	820,000	(820,000)
Inventory	400,000	300,000	X
Accounts Payable	175,000	200,000	X
CASH PRODUCTION COSTS	X	X	X	X
SG&A Expenses	X	X	600,000	(600,000)
Prepaid Expenses	50,000	75,000	X
CASH OPERATING EXPENSES	X	X	X	X
CASH AFTER OPERATIONS (ALSO NET CASH AFTER OPS)	X	X	X	X
Interest Expense	X	X	50,000	(50,000)
Dividends Paid	X	X	25,000	(25,000)
FINANCING COSTS	X	X	X	X	(75,000)
NET CASH INCOME	X	X	X	X
Long-Term Debt Payments	X	X	X	(175,000)
CASH AFTER DEBT AMORT	X	X	X	X	130,000
Gross Fixed Assets	800,000	950,000	X
FINANCING SURPLUS / (REQ)	X	X	X	X
Cash	50,000	30,000	X	X

Sensitivity Exercise:

Washington Accounting Company is focused 100% on preparing tax returns for personal and business clients. The company reported the following results for 2020. A new competitor has opened nearby, so the management would like to assess the impact of a 20% decline in returns prepared at the 2020 average rate. Alternatively, they feel they may be able to keep the same number of clients by dropping their average price by 25%. Calculate the impact of each of these changes individually, and as a worst-case scenario where the firm decreases its costs and business still falls by 20%, calculate the combined impact of both events.

	2020 Results	20% Drop in Returns	25% Drop in Fee	Combined Impact
# of tax returns prepared (year)	1,800
Average fee per tax return	$200
Gross Revenues	$360,000

If the companys expenses and debt payments total $250,000, what is its break-even price point assuming they are able to keep the number of tax returns steady from 2020?