Financial Risks: Describe the potential impacts of the following types of financial risk on the company featured in the case study:

• Interest rate risk
• Economic risk
• Credit risk
• Operational risk

Table A Company Financials Assuming a 25% Increase in Sales ($ in millions) 2009 2010 Assets Cash Accounts receivable Inventories Plant & equipment Total $ 12 240 200 400 $852 1 25% 1 25% 1 25% 1 25% $ 15 300 250 500 $1,065 1 25% 1 25% Liabilities and Equity Accounts payable Accrued expenses Long-term debt Owners' equity Total External financing need Total $100 80 272 400 $852 0 $852 Unchanged footnotea $ 125 100 272 442 $ 939 126 $1,065 Exhibit 1 SciTronics, Inc. Consolidated Income Statements 2005-2008 ($ in thousands) 2004 2005 2006 2007 2008 Sales $115,000 Cost of goods sold Gross margin Research & development Sell, general & administrative Operating income Interest expense Profit before tax Income tax Net income $147,000 43,000 104,000 15,000 79,000 10,000 1,000 9,000 4,000 $ 5,000 $171,000 50,000 121,000 20,000 92,000 9,000 2,000 7,000 2,000 $ 5,000 $205,000 63,000 142,000 26,000 106,000 10,000 2,000 8,000 3,000 $ 5,000 $244,000 74,000 170,000 28,000 116,000 26,000 2,000 24,000 10,000 $ 14,000 Exhibit 2 SciTronics, Inc. Consolidated Balance Sheet at December 31, 2005-2008 ($ in thousands) 2005 2006 2007 2008 Cash Accounts receivable Inventories Other current assets Total current assets Net property & equipment Other Total assets $ 9,000 42,000 21,000 10,000 82,000 9,000 2,000 $93,000 $ 10,000 53,000 28,000 13,000 104,000 12,000 2,000 $118,000 $ 15,000 61,000 30,000 21,000 127,000 13,000 6,000 $146,000 $ 18,000 66,000 29,000 20,000 133,000 18,000 8,000 $159,000 $ 3,000 5,000 10,000 3,000 $ 18,000 6,000 13,000 3,000 40,000 9,000 21,000 10,000 Notes payable Accounts payable Accrued expenses Other current liabilities Total current liabilities Long-term senior debt Subordinated convertible debt Other liabilities Owners' equity Treasury stock Owners' equity Total liabilities and equity $ 8,000 7,000 21,000 4,000 40,000 8,000 20,000 7,000 71,000 $ 10,000 6,000 28,000 4,000 48,000 7,000 20,000 9,000 85,000 (10,000) 75,000 $159,000 1,000 61,000 3,000 66,000 61,000 $93,000 66,000 $118,000 71,000 $146,000 Table A Company Financials Assuming a 25% Increase in Sales ($ in millions) 2009 2010 Assets Cash Accounts receivable Inventories Plant & equipment Total $ 12 240 200 400 $852 1 25% 1 25% 1 25% 1 25% $ 15 300 250 500 $1,065 1 25% 1 25% Liabilities and Equity Accounts payable Accrued expenses Long-term debt Owners' equity Total External financing need Total $100 80 272 400 $852 0 $852 Unchanged footnotea $ 125 100 272 442 $ 939 126 $1,065 Exhibit 1 SciTronics, Inc. Consolidated Income Statements 2005-2008 ($ in thousands) 2004 2005 2006 2007 2008 Sales $115,000 Cost of goods sold Gross margin Research & development Sell, general & administrative Operating income Interest expense Profit before tax Income tax Net income $147,000 43,000 104,000 15,000 79,000 10,000 1,000 9,000 4,000 $ 5,000 $171,000 50,000 121,000 20,000 92,000 9,000 2,000 7,000 2,000 $ 5,000 $205,000 63,000 142,000 26,000 106,000 10,000 2,000 8,000 3,000 $ 5,000 $244,000 74,000 170,000 28,000 116,000 26,000 2,000 24,000 10,000 $ 14,000 Exhibit 2 SciTronics, Inc. Consolidated Balance Sheet at December 31, 2005-2008 ($ in thousands) 2005 2006 2007 2008 Cash Accounts receivable Inventories Other current assets Total current assets Net property & equipment Other Total assets $ 9,000 42,000 21,000 10,000 82,000 9,000 2,000 $93,000 $ 10,000 53,000 28,000 13,000 104,000 12,000 2,000 $118,000 $ 15,000 61,000 30,000 21,000 127,000 13,000 6,000 $146,000 $ 18,000 66,000 29,000 20,000 133,000 18,000 8,000 $159,000 $ 3,000 5,000 10,000 3,000 $ 18,000 6,000 13,000 3,000 40,000 9,000 21,000 10,000 Notes payable Accounts payable Accrued expenses Other current liabilities Total current liabilities Long-term senior debt Subordinated convertible debt Other liabilities Owners' equity Treasury stock Owners' equity Total liabilities and equity $ 8,000 7,000 21,000 4,000 40,000 8,000 20,000 7,000 71,000 $ 10,000 6,000 28,000 4,000 48,000 7,000 20,000 9,000 85,000 (10,000) 75,000 $159,000 1,000 61,000 3,000 66,000 61,000 $93,000 66,000 $118,000 71,000 $146,000