FMGT 1116 Lecture Notes - Share Capital, Retained Earnings
Get access
Related Documents
Related Questions
Executive Fruitâs financial manager believes that sales in 2015 could rise by as much as 20% or by as little as 5%. Assets and costs change in proportion to sales, debt remains constant, and no new equity financing occurs. |
a. | Recalculate the first-stage pro forma financial statements under these two growth assumptions and calculate the required external financing (All figures are in thousands). (Enter your answers in thousands.) |
Base Case | 20% Growth | 5% Growth | ||||
INCOME STATEMENT | ||||||
Revenue | $ | 7,000 | $ | $ | ||
Cost of goods sold | 6,300 | |||||
EBIT | $ | 700 | $ | $ | ||
Interest | 140 | |||||
Earnings before taxes | $ | 560 | $ | $ | ||
State and federal tax | 224 | |||||
Net income | $ | 336 | $ | $ | ||
Dividends | 224 | |||||
Retained earnings | $ | 112 | $ | $ | ||
BALANCE SHEET | ||||||
Assets | ||||||
Net working capital | $ | 700 | $ | $ | ||
Fixed assets | 2,800 | |||||
Total assets | $ | 3,500 | $ | $ | ||
Liabilities and shareholders' equity | ||||||
Long-term debt | $ | 1,400 | $ | $ | ||
Shareholders' equity | 2,100 | |||||
Total liabilities and shareholders' equity | $ | 3,500 | $ | $ | ||
Required external financing | $ | $ | ||||
b. | Assume any required external funds will be raised by issuing long-term debt and that any surplus funds will be used to retire such debt. Prepare the completed (second-stage) pro forma balance sheet. (Enter your answers in thousands.) |
BALANCE SHEET | ||||||
Base Case | 20% Growth | 5% Growth | ||||
Assets | ||||||
Net working capital | $ | 700 | $ | $ | ||
Fixed assets | 2,800 | |||||
Total assets | $ | 3,500 | $ | $ | ||
Liabilities and shareholders' equity | ||||||
Long-term debt | $ | 1,400 | $ | $ | ||
Shareholders' equity | 2,100 | |||||
Total liabilities and shareholders' equity | $ | 3,500 | $ | $ | ||
Financial statements of Ansbro Corporation follow: |
Ansbro Corporation Comparative Balance Sheet | ||
Ending Balance | Beginning Balance | |
Assets: | ||
Cash and cash equivalents | $32 | $29 |
Accounts receivable | 82 | 80 |
Inventory | 41 | 39 |
Property, plant and equipment | 648 | 560 |
Less: accumulated depreciation | 346 | 307 |
Total assets | $457 | $401 |
Liabilities and stockholders' equity: | ||
Accounts payable | $49 | $68 |
Bonds payable | 135 | 190 |
Common stock | 92 | 80 |
Retained earnings | 181 | 63 |
Total liabilities and stockholders' equity | $457 | $401 |
Income Statement | |
Sales | $745 |
Cost of goods sold | 373 |
Gross margin | 372 |
Selling and administrative expenses | 127 |
Net operating income | 245 |
Income taxes | 87 |
Net income | $158 |
Cash dividends were $40. The company did not dispose of any property, plant, and equipment. It did not issue any bonds payable or repurchase any of its own common stock. The following questions pertain to the company's statement of cash flows. |
The net cash provided by (used in) investing activities for the year was: |
$12
$(88)
$(55)
$(40)