3. Stonyfield Balance Sheet 1992-4

5. USE OF INTEREST TO CREATE POSITIVE LEVERAGE COMPANY A COMPANY B SALES $40 M $40 EXPENSES ($30 M) ($30) EBITDA $10 M $10 M INTEREST 0 ($4) TAXABLE EARNINGS $10 M $6 M TAXES @40% ($4) M ($2.4 M) AFTER TAX EARNINGS $6 M $3.6 M Total Asset 100M 100M Return on Assets 6% 3.6% Shareholder Equity 100M 50 M Return on Equity 6% 7.2%

6. Depreciation Depreciation = loss of value of a tangible asset over its lifetime. What is included: Significant items in a business operation whose useful life extends beyond the current year. Examples: Furniture and Equipment Buildings, factories and their machinery Computers Allocation of loss: Determined by a IRS (Internal Revenue Service ) schedule, usually: 5-7 years for furniture, equipment and computers 40 years for buildings unless specialized in which case building components can be broken out

7. Amortization Amortization= loss of value of an intangible asset over its lifetime What is included: Items that are associated with a trade or business and are not physical objects (except software discs). Examples: Goodwill- Goodwill is the name given to the differential between the sum of the actual values assigned to the assets purchased and the total purchase price. This typically occurs when one business buys another Trademarks, copyrights and patent rights Software, software codes and discs Allocation of loss: –Usually over a period of 15 years

8. Receivables Period1 st 2 nd 3 rd 4 th Receivables to start (beginning of period) 10162124 Sales100110120 Collected from This period 9099108 Collected from Prior period 4699 Total Net94105117 Receivables End of Period 16212427