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24. In 2012, the JCrew Company's sales were $15.0 million. Its balance sheet at year end 2012 is shown below. JCrew's 2013 sales are expected to be $21 million. Earnings after tax is expected to be 6.0% of sales, and annual dividends of $575,000 are expected to be paid in 2013. The company presently has excess plant and equipment capacity. As a result, assume that the net fixed asset figure on the balance sheet will remain constant for 2013. Assuming that the ratios of assets (except fixed assets, net) to sales and accounts payable to sales in 2012 remain the same in 2013, calculate the total amount, i.e., one number, of external financing required for 2013, using the percentage of sales method.

JCrew Co. Balance Sheet
(December 31, 2012)($ millions)
Current assets: Current liabilities:
Cash $0.5 Accts. payable $0.7
Accts. Rec. 1.5 Notes payable 0.8
Inventory 2.5 Long-term debt 2.3
Fixed assets, net 1.5 Stockholders' equity 2.2
Total Assets $6.0 Total Liabilities and Equity $6.0 (Points : 3.5)

A. $750,000
B. $220,000
C. $835,000
D. None of the above

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Tod Thiel
Tod ThielLv2
28 Sep 2019

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Question 1:

Quantitative Problem: Rosnan Industries' 2013 and 2012 balance sheets and income statements are shown below.

Balance Sheets:

2013

2012

Cash and equivalents

$70

$55

Accounts receivable

275

300

Inventories

375

350

Total current assets

$720

$705

Net plant and equipment

2,000

1,490

Total assets

$2,720

$2,195

Accounts payable

$150

$85

Accruals

75

50

Notes payable

120

145

Total current liabilities

$345

$280

Long-term debt

450

290

Common stock

1,225

1,225

Retained earnings

700

400

Total liabilities and equity

$2,720

$2,195

Income Statements:

2013

2012

Sales

$2,000

$1,500

Operating costs excluding depreciation

1,250

1,000

EBITDA

$750

$500

Depreciation and amortization

100

75

EBIT

$650

$425

Interest

62

45

EBT

$588

$380

Taxes (40%)

235

152

Net income

$353

$228

Dividends paid

$53

$48

Addition to retained earnings

$300

$180

Shares outstanding

100

100

Price

$25.00

$22.50

WACC

10.00%

The balance in the firm's cash and equivalents account is needed for operations and is not considered "excess" cash.

What is Rosnan's 2013 net operating working capital (NOWC)?

What is Rosnan's 2013 net working capital (NWC)?

Question 2:

Balance Sheet

The assets of Dallas & Associates consist entirely of current assets and net plant and equipment. The firm has total assets of $2.8 million and net plant and equipment equals $2.3 million. It has notes payable of $145,000, long-term debt of $754,000, and total common equity of $1.55 million. The firm does have accounts payable and accruals on its balance sheet. The firm only finances with debt and common equity, so it has no preferred stock on its balance sheet.

Write out your answers completely. For example, 25 million should be entered as 25,000,000.

What is the company's total debt?

$

What is the amount of total liabilities and equity that appears on the firm's balance sheet?

$

What is the balance of current assets on the firm's balance sheet?

$

What is the balance of current liabilities on the firm's balance sheet?

$

What is the amount of accounts payable and accruals on its balance sheet? [Hint: Consider this as a single line item on the firm's balance sheet.]

$

What is the firm's net working capital?

$

What is the firm's net operating working capital?

$

What is the monetary difference between your answers to part f and g?

The Booth Company's sales are forecasted to double from $1,000 in 2012 to $2,000 in 2013. Here is the December 31, 2012, balance sheet:
Cash $ 100 Accounts payable $ 50
Accounts receivable 200 Notes payable 150
Inventories 200 Accruals 50
Net fixed assets 500 Long-term debt 400
Common stock 100
Retained earnings 250
Total assets $1000 Total liabilities and equity $1000

Booth's fixed assets were used to only 50% of capacity during 2012, but its current assets were at their proper levels in relation to sales. Spontaneous liabilities and all assets except fixed assets must increase at the same rate as sales, and fixed assets would also have to increase at the same rate if the current excess capacity did not exist. Booth's after-tax profit margin is forecasted to be 8% and its payout ratio to be 50%. What is Booth's additional funds needed (AFN) for the coming year?

The company sales forecast to double from $1,000 in 2013 to $2,000 in 2014. Here is the Dec 2013 balance sheet: Cash-$100, accounts receivable-$200, Inventories-$200, Net fixed assets-$500= Total assets-$1,000. Accounts payable-$50, notes payable-$150, Accurals-$50, Long term debt-$400, Common stock-$100, Retained earnings-$250= Total liabilities and equity-$1,000. The fixed assets were used to only 50% of capacity during 2013, but it's current assets were at their proper levels in relation to sales. All assets except fixed assets must increase at the same rate. After tax profit margin is forecasted to be 5%, and payout ratio 60%, What is the AFN for coming year?

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