Forest of Flowers is a floral retailer established in 1996 in London, Ontario by Wayne Watson. It operates multiple retail stores and offers plants, cut flowers, and customized arrangements. Most revenue comes from wedding and funeral arrangements. It gains customers through competitive pricing from bulk purchasing. Projections for 2004 show best case scenario sales of $2.93 million and net income of $191,540, or worst case sales of $2.47 million and net income of $83,127. The company seeks to expand operations.

2. • Name: Forest Of Flowers
• Established: 1996
• Original Owners: Wayne Watson
• Wayne Originally initially established “FOF” with 3 primary retail
stores.

3. • Forest of Flowers is a full service floral retailer
• Located in strategic positions throughout London, Ontario.

4. • Products Include:
Plants
Freshly Cut Flowers
Customized Floral Arrangements
Most significant portions of revenue came from custom arrangements
for weddings and funerals, etc.

5. • Forest of Flowers gained and kept
significant numbers of customers
by offering extremely competitive
pricing that other flower retailers
had trouble matching
• Materials are purchased at
significant discounts due to
large quantity orders
• Customers benefit from these
savings

6. • Through disciplined
management, growth was
controlled and constant,
including growth of sales staff.
• Distribution remained almost
exclusively in the London market
allowing for a deeper market
saturation.

7. • 2004 Projections:
• Best Case Scenario:
$2,930,368.67
• Worst Case Scenario:
$2,471,390.10
• The Majority of all sales come
with drastic seasonality.
• Examples: Valentines Day,
Mother’s Day, Christmas, etc

8. 0
0.5
1
1.5
2
2.5
3
2001 2002
2003
2004
1.91
2.13 2.15
2.93
Net Sales in Millions BEST CASE
0
0.5
1
1.5
2
2.5
2001 2002
2003
2004
1.91
2.13 2.15
2.47
Net Sales in Millions Worst CASE

9. Complete customer satisfaction,
extremely competitive prices and a
wider variety of international
choices seem to be driving the
sales growth.
Expand distribution area beyond
London

10. Sizeable Assets Include:
• Inventories
Forest of Flowers eliminated
wholesalers and purchasing
agents and obtains its inventory
from international growers.
Purchases assets in a way that
competitors cannot.

11. 0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
2001 2002 2003
3.95 4.10
3.67
7.21
8.14
7.29
Total Asset
Turnover
Fixed Asset
Turnover

12. • Total Asset Turnover indicates
that Forest of Flowers is not
extremely asset intensive,
however asset efficiency is
declining.
• If this expansion were to be
approved, the T.A.T and F.A.T
ratios would need to show some
significant improvement.

13. 0%
20%
40%
60%
80%
100%
2001 2002 2003
15.48 15.57 18.95
Average Collection Period
• Average Collection Period rose
slightly in 2002 and then rose more
noticeably in 2003.
• This can be explained due to
Accounts Receivable increasing
quicker than Net Sales.

14. • Inventory levels climbing higher
than Sales growth caused a
slight increase to INV. Days in
2002.
• The company maintained their
significant quantity discounts in
2003 decreasing COGS.
40
45
50
55
2001
2002
2003
43.9
50.05 51.01
Inventory Days

15. • Operations expenses have increased
slightly over the years showing that
Mr. Watsons $80,000 reinvestments
were certainly needed to avoid
unnecessary financing.
• However, T.A.T and F.A.T show that
the company is utilizing its assets
fairly well, though these ratios could
stand to see some improvement if the
expansion is approved.
• Customer credit policies need to be
tightened marginally to decrease ACP
days and bring in uncollected funds
for the company.

17. CFO 2002 2003
Net income 71,453 61,640
Depreciation 24,480 35,015
Accounts receivable 9,684 20,657
Inventory 28,203 7,388
Prepaid Expenses 15,243 (4,056)
Accounts Payable (27,523) 5,843
Taxes 10,687 (24,900)
Deferred Tax 1,948 10,459
Total 27,915 64,068
CFI
Gross Fixed Assets 21,091 68,070
Total (21,091) (68,070)
CFF
Deposits (7,515) -
Line of Credit 7,707 (21,716)
Current Portion of Long Term Debt (5,348) 3,522
Bank Loans (30,407) 9,546
Due to Shareholders 6,967 21,600
Total (13,566) 12,952
Grand Total (6,742) 8,950
Cash Change (6,742) 8,949

18. Liquidity 2001 2002 2003
Current Ratio 1.262972 1.731071 2.696526
Quick Ratio 0.69 0.90 1.48
Accounts Payable
Days 23.67 8.46 10.53

19. Current ratio 1.262972 1.731071 2.696526
2001 2002 2003
The current ratio more than doubled between 2001 and 2003.
Examining both the Current Assets and Current Liabilities
growth rate, between 2001 and 2002 the current assets grew
more than current liabilities declined but between 2002 and
2003 current liabilities declined more than current assets grew.
Growth rates 24.06% 13.77%
-9.48% -26.96%

20. A/P Days 23.67 8.46 10.53
-58.53% 29.96%Growth rates
2001 2002 2003
Accounts payable had a significant
decrease from 2001 to 2002

21. Debt/Equity 1.53 0.98 0.80
TIE 5.988618 6.957103 4.285158

22. GPM 62.05% 60.44% 59.06%
OPM 4.76% 4.23% 3.59%
NPM 3.70% 3.36% 2.87%
ROE 37.09% 27.24% 19.03%

23. ROE 37.09% 27.24% 19.03%
Return on equity had a
significant decrease due to the
increase of shareholders wealth.
37.44% 23.50%Growth rates

25. Expected or Best Case
• A 3% increase in sales from
existing stores and $720,000 in
revenues from new stores
• COGS to decrease to 38% of
sales by gaining a seat on the
OFG
Worst Case
 A 10% decrease in sales from
existing stores and $540,000 in
revenues from new stores
 Not able to gain a seat on the
OFG resulting in COGS to be 41%
of sales

26.  $3000 increase in Rent for each new store
 New Administration Costs of $3,600
 $1320 increase in Insurance expense
 Interest charge is $23,760
 $180,000 increase in new GFA and Term Loans
 Current Portion of LTD would be $43,200

27. 2003
Net Sales $2,145,989
Gross Profit $1,267,398
Income before tax $77,000
Net Income $61,640
Net sales $ 2,930,368.67
Cost of goods sold $ 1,113,540.09
Gross profit $ 1,816,828.58
Operating expenses
Administration Cost $ 3,600.00
Advertising & promotion $ 126,418.88
Automotive $ 20,182.23
Bad debts $ 5,735.14
Bank charges & interest $ 23,760.00
Credit card discounts $ 36,942.50
Depreciation $ 47,015.00
Delivery $ 138,326.13
Insurance $ 4,746.00
Legal & accounting $ 4,678.24
Office expenses $ 6,174.83
Repairs & maintenance $ 4,556.71
Rent $ 159,014.00
Store supplies $ 129,373.85
Telephone $ 24,125.82
Travel & entertainment $ 21,768.95
Utilities $ 26,668.40
Wages & benefits $ 794,472.63
Total operating expenses $ 1,577,559.31
Income before tax $ 239,269.26
Income taxes $ 47,729.56
Net income $ 191,539.71

28. 2003
 Total Assets $584,581
 Retained Earnings $239,922
Cash $ 145,346.85
Accounts receivable $ 152,105.48
Inventory $ 155,633.59
Prepaid expenses $ 32,127.71
Total current assets $ 485,213.63
Gross fixed assets $ 452,432.00
Leasehold Improvements $ 180,000.00
Less: accumulated depreciation $ 204,907.00
Net fixed assets $ 427,525.00
Deposits $ 19,461.40
Organization cost $ 4,039.00
Total assets $ 936,239.03
Operating line of credit $ -
Accounts payable $ 32,120.12
Taxes payable $ 39,478.25
Current portion LTD $ 43,200.00
Total current liabilities $ 114,798.37
Term bank loans $ 166,374.00
Due to shareholders $ 104,347.00
Deferred income tax $ 35,221.96
Total long term liabilities $ 305,942.96
Share capital $ 84,036.00
Retained earnings $ 431,461.71
Total shareholders' equity $ 515,497.71
Total liabilities & equity $ 936,239.03

29. 2.696
1.48
10.53
3.671
7.286
18.95
51.01
59.06%
3.59%
2.87%
19.03%
0.80
4.285
2.87%
3.671
1.804
19.03%
2003
2004(P)

30. 2003
 Net Sales $2,145,989
 Gross Profit $1,267,398
 Income before tax $77,000
 Net Income $61,640
Net sales $ 2,471,390.10
Cost of goods sold $ 1,011,813.71
Gross profit $ 1,459,576.39
Operating expenses
Administration Cost $ 3,600.00
Advertising & promotion $ 106,618.11
Automotive $ 6,968.63
Bad debts $ 2,856.59
Bank charges & interest $ 23,760.00
Credit card discounts $ 31,156.26
Depreciation $ 47,015.00
Delivery $ 116,660.35
Insurance $ 4,746.00
Legal & accounting $ 3,945.49
Office expenses $ 5,207.68
Repairs & maintenance $ 3,843.00
Rent $ 159,014.00
Store supplies $ 109,110.24
Telephone $ 20,347.04
Travel & entertainment $ 18,359.32
Utilities $ 22,491.38
Wages & benefits $ 670,035.75
Total operating expenses $ 1,355,734.85
Income before tax $ 103,841.54
Income taxes $ 20,714.36
Net income $ 83,127.18

31. 2003
Total Assets $584,581
Retained Earnings $239,922
Cash $ 65,373.73
Accounts receivable $ 128,281.47
Inventory $ 141,415.83
Prepaid expenses $ 27,095.60
Total current assets $ 362,166.63
Gross fixed assets $ 452,432.00
Leasehold Improvements $ 180,000.00
Less: accumulated depreciation $ 204,907.00
Net fixed assets $ 427,525.00
Deposits $ 19,461.40
Organization cost $ 4,039.00
Total assets $ 813,192.03
Operating line of credit $ -
Accounts payable $ 29,185.82
Taxes payable $ 33,294.84
Current portion LTD $ 43,200.00
Total current liabilities $ 105,680.66
Term bank loans $ 166,374.00
Due to shareholders $ 104,347.00
Deferred income tax $ 29,705.20
Total long term liabilities $ 300,426.20
Share capital $ 84,036.00
Retained earnings $ 323,049.18
Total shareholders' equity $ 407,085.18
Total liabilities & equity $ 813,192.03

32. 2.696
1.48
10.53
3.671
7.2859
18.95
51.01
59.06%
3.59%
2.87%
19.03%
0.80
4.285158
2.87%
3.671
1.804
19.03%
Liquidity
Current 3.427
Quick 2.09
A/P Days same
Efficiency
TAT 3.039
FAT 5.781
ACP same
Inv Days same
Profitability
GPM 59.06%
OPM 4.20%
NPM 3.36%
ROE 20.42%
Leverage
D/E 1.00
TIE 4.370
Dupont
NPM 3.36%
TAT 3.039
Leverage 1.998
Total 20.42%
2003
2004 (P)

33. Best Case
• Net Sales increase by 36.6%
• Net Income increases by 210.7%
• Total Assets Increase by 60.2%
Worst Case
• Net Sales increase by 15.16%
• Net Income increases by 34.9%
• Total Assets Increase by 39.1%