You are the new Marketing VP for Watermetco, a company that sells two items: meters You are considering buying Exampleco

[answerhappygod]

You are the new Marketing VP for Watermetco, a company that
sells two items: meters
You are considering buying Exampleco, a manufacturing company.
The president and CFO are traveling and will not be back for two
weeks, and the financial statements cannot be released until then.
However, you have talked to the daughter of the owner and have
written down the following comments. Try to construct a balance
sheet for the company, making reasonable assumptions where
necessary.
- We started Exampleco two years ago with $3.3 million that dad
had inherited.
- Our sales have done well, and if we can keep them at last
month’s performance, we would reach $4.2 million a year. We hope to
do even better than that.
- We bought $4.5 million of equipment at an auction. It was used
equipment but had been completely rebuilt, so dad decided on a 10
year depreciation period.
- We just rent the space we are in.
- We never have any cash or notes in the bank. Dad set up a
credit line, we float on that. The bank didn’t want to give us
long-term financing until we were in operation for two years. We
are trying to decide right now whether to take out some long-term
financing and really expand the business to sell it to you and stay
on as operators. - At first, our draw on our credit line was over 3
million, and the only way we could get it was to have a personal
guarantee from my uncle. Lucky for us, the business has gone well,
and the draw from the bank has dropped over two years we have been
in business. Dad thinks we can get the requirement for a personal
guarantee lifted.
- When we set up the business, we decided to leave the
depreciation in the business. We also decided to set up an
objective of leaving a quarter million dollars of net income per
year in the company and treating ourselves to a dividend on
everything else. So far, we have met our objective.
- We play it safe on inventory. It is running 35 days of sale,
which is a lot considering our material’s cost is only 50% of sale.
We could probably bring it down, but we have just been too busy
filling orders.
- We have been stringing our suppliers out 50 days. We have to
talk to them every month to assure them we are doing okay, but it
has worked so far. Because our sales grew to $350k last month and
we have stayed with the same supplier, they haven’t minded our slow
pay.
- Our prepaids are so small we ignore them. Our accountant said
that they weren’t material, and that we could just expense this
stuff as we spent it.
- We are current on taxes. Dad knew a guy that lost his business
because of unpaid taxes, so he has insisted on a monthly payment to
keep us current.
- Our payroll is two weeks behind, but it isn’t a big deal
because our staff is only 22. Otherwise we are current on all our
expenses.
- Our customers are large companies, and they are sure slow to
pay. Our receivables are running 55 days.
- We are still getting by on the original equipment we
bought.
Do you need the income statement to prepare the balance sheet in
this case? Would you be able to make an intelligent decision about
whether to buy the business without looking at the income
statement? Explain why in one sentence.