Caswell Publishing Co. Balance Sheet

(Related to Checkpoint17.1) (Discretionary financing needs)In the spring of 2013 the Caswell Publishing Company established a custom publishing business for its business clients. These clients consisted principally of small-to medium-size companies in Round Rock, Texas. However, the company’s plans were disrupted when they landed a large printing contract from Dell Computers Corp. (DELL) that they expected would run for several years. Specifically, the new contract would increase firm revenues by 100 percent. Consequently, Caswell’s management knew they would need to make some significant changes in firm capacity, and quickly. The following balance sheet for 2013 and pro forma balance sheet for 2014 reflect the firm’s estimates of the financial impact of the 100 percent revenue growth:

a.  How much new discretionary financing will Caswell require based on the above estimates?

b.  Given the nature of the new contract and the specific needs for financing that the firm expects, what recommendations might you offer to the firm’s CFO as to specific sources of financing the firm should seek to fulfill its DFN?

A. Sale of fixed assets. B. Notes payable. C. Common stock. D. Long-term debt. E. Retained earnings.

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