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28 Sep 2019
The following is the financial statement of Executive Fruit Company for the year ended December 2014.
INCOME STATEMENT, 2014 (Figures in $ Thousands) Revenue $ 9,500 Cost of goods sold 8,550 EBIT $ 950 Interest 190 Earnings before taxes $ 760 State and federal tax 304 Net income $ 456 Dividends 304 Additions to retained earnings $ 152
BALANCE SHEET (Year-End, 2014) (Figures in $ Thousands) Assets Net working capital $ 950 Fixed assets 3,800 Total assets $ 4,750 Liabilities and shareholders' equity Long-term debt $ 1,900 Shareholders' equity 2,850 Total liabilities and shareholders' equity $ 4,750
The following are the first stage and second stage pro forma financial statements of Executive Fruit Company for the year ended December 2015.
First stage pro forma statements:
PRO FORMA INCOME STATEMENT, 2015 (Figures in $ Thousands) Revenue $ 10,450 Cost of goods sold 9,405 EBIT $ 1,045 Interest 190 Earnings before taxes $ 855 State and federal tax 342 Net income $ 513 Dividends 342 Additions to retained earnings $ 171
PRO FORMA BALANCE SHEET (Year-End, 2015) (Figures in $ Thousands) Assets Net working capital $ 1,045 Fixed assets 4,180 Total assets $ 5,225 Liabilities and shareholders' equity Long-term debt $ 1,900 Shareholders' equity 3,021 Total liabilities and shareholders' equity $ 4,921 Required external financing $ 304
Second stage pro forma balance sheet:
PRO FORMA BALANCE SHEET (Year-End, 2015) (Figures in $ Thousands) Assets Net working capital $ 1,045 Fixed assets 4,180 Total assets $ 5,225 Liabilities and shareholders' equity Long-term debt $ 2,204 Shareholders' equity 3,021 Total liabilities and shareholders' equity $ 5,225
How would Executive Fruitâs financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.)
Dividends fall by $ . Therefore, the requirement for external financing falls from $ to $ . On the other hand, shareholders' equity will be increased by $ .
The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.):
Long-term debt $ Shareholders' equity Total $
| The following is the financial statement of Executive Fruit Company for the year ended December 2014. |
| INCOME STATEMENT, 2014 | |||
| (Figures in $ Thousands) | |||
| Revenue | $ | 9,500 | |
| Cost of goods sold | 8,550 | ||
| EBIT | $ | 950 | |
| Interest | 190 | ||
| Earnings before taxes | $ | 760 | |
| State and federal tax | 304 | ||
| Net income | $ | 456 | |
| Dividends | 304 | ||
| Additions to retained earnings | $ | 152 | |
| BALANCE SHEET (Year-End, 2014) | |||
| (Figures in $ Thousands) | |||
| Assets | |||
| Net working capital | $ | 950 | |
| Fixed assets | 3,800 | ||
| Total assets | $ | 4,750 | |
| Liabilities and shareholders' equity | |||
| Long-term debt | $ | 1,900 | |
| Shareholders' equity | 2,850 | ||
| Total liabilities and shareholders' equity | $ | 4,750 | |
| The following are the first stage and second stage pro forma financial statements of Executive Fruit Company for the year ended December 2015. |
| First stage pro forma statements: |
| PRO FORMA INCOME STATEMENT, 2015 | |||
| (Figures in $ Thousands) | |||
| Revenue | $ | 10,450 | |
| Cost of goods sold | 9,405 | ||
| EBIT | $ | 1,045 | |
| Interest | 190 | ||
| Earnings before taxes | $ | 855 | |
| State and federal tax | 342 | ||
| Net income | $ | 513 | |
| Dividends | 342 | ||
| Additions to retained earnings | $ | 171 | |
| PRO FORMA BALANCE SHEET (Year-End, 2015) | |||
| (Figures in $ Thousands) | |||
| Assets | |||
| Net working capital | $ | 1,045 | |
| Fixed assets | 4,180 | ||
| Total assets | $ | 5,225 | |
| Liabilities and shareholders' equity | |||
| Long-term debt | $ | 1,900 | |
| Shareholders' equity | 3,021 | ||
| Total liabilities and shareholders' equity | $ | 4,921 | |
| Required external financing | $ | 304 | |
| Second stage pro forma balance sheet: |
| PRO FORMA BALANCE SHEET (Year-End, 2015) | |||
| (Figures in $ Thousands) | |||
| Assets | |||
| Net working capital | $ | 1,045 | |
| Fixed assets | 4,180 | ||
| Total assets | $ | 5,225 | |
| Liabilities and shareholders' equity | |||
| Long-term debt | $ | 2,204 | |
| Shareholders' equity | 3,021 | ||
| Total liabilities and shareholders' equity | $ | 5,225 | |
| How would Executive Fruitâs financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.) |
| Dividends fall by $ . Therefore, the requirement for external financing falls from $ to $ . On the other hand, shareholders' equity will be increased by $ . |
| The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.): |
| Long-term debt | $ |
| Shareholders' equity | |
| Total | $ |
Jarrod RobelLv2
28 Sep 2019