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Afro-Caribbean Craft Products, a sole proprietorship, which operated on an itinerant basis from the owner's home, was recently offered an attractive opportunity to lease space at an International Airport to establish a retail outlet. The proprietor (Ms Earla John) estimated that she would need a USD40,0002 loan to finance the capital and operating costs associated with the proposed retail outlet. Ms John approached your accounting firm for help with the preparation of a set of projected financial statements requested by a potential financier. She provided a set of historical financial statements for the two most recent years and information about her expectations for the business in the coming year. Students are required to estimate the behavior of all cost items in the income statement and prepare a set of projected financial statements. They are also required to prepare a financial analysis using key ratios and to make a recommendation to the potential financier. This case helps to fill a gap in the pedagogical literature by focusing on the application of basic budgeting principles in a small scale, sole proprietorship setting. The three colleagues that have evaluated the case material all indicated that the specified objectives were effectively targeted in the case material. This case has been used in three sections of the Managerial Accounting course offered in the BSc. Accounting program at a medium-sized university in the Midwestern USA. Students were generally able to properly classify most of the income statements items, compute the project income statement, and projected statement of cash flow amounts and to prepare the required financial statements. Most students provided a well-reasoned recommendation regarding whether the loan should be granted to Ms John. Students generally indicated that the case material was clear and realistic.