Exhibit 8. Calculation Recovery Solvency Ratio

	1980	1981	1982	1983	1984	1985	1986	1987
Current ratio	2,669	2,212	2,068	1,360	1,333	2,583	1,368	1,075
RSR	1,220	1,070	0,857	0,673	0,979	0,988	0,611	0,269

Recovery Solvency Ratio shows the firm’s ability to renew its paying capacity over half a year period. If it’s less than 1,00 company has no real opportunity of solvency recovery in next 6 months. In the light of restrictions on unsecured indebtedness and impossibility of raising new funds company might try to restructure its expense.

We chose to calculate sales forecasts using an average sales growth figure from the last seven years. The average rate at sales increases from year to year is 6,02%. We used this figure to estimate sales for the following five years.

Exhibit 9. Computation of Future Cash Flow (1/3)

	1982	1983	1984	1985	1986	1987	1988
Sales	510 380	596 498	774 860	776 002	500 658	504 483	625 000	Average
Implied growth rate		16,87%	29,90%	0,15%	-35,48%	0,76%	23,89%	6,02%

The next number listed on the income statement is the Cost of Sales. To get an accurate forecast of the Cost of Sales, we chose to calculate the average Cost of Sales divided by sales.

Exhibit 10. Computation of Future Cash Flow (2/3)

	1982	1983	1984	1985	1986	1987	Average
Cost of goods sold	54,83%	67,69%	65,13%	52,51%	64,03%	64,53%	61,45%

Tax Expense is obviously just a tax rate multiplied by the income before taxes. The average tax rate is 27,38%.

Exhibit 11. Computation of Future Cash Flow (3/3)

	1982	1983	1984	1985	1986	1987	Average
Tax Rate	47,46%	70,09%	10,50%	30,81%	5,42%	0,00%	27,38%

Since Coleco might miss interest payments of $10 million due on debentures on April 1, 1987 and another $4 million due on May 1, 1987, reduction of SG&A Expense should be the primary driver for company’s recovering. Let’s take the interest expense growth as a complicated percentage on the 1987 basis (9,7%), and try to cut administrative expenses by a half and limit the growth by sales increasing (6,02% per year).

The Cash Flow Forecast with the implemented suggestion presented in the table below.