Assume that operating costs, assets, and spontaneous liabilities increase propor
ID: 1169878 • Letter: A
Question
Assume that operating costs, assets, and spontaneous liabilities increase proportionally with sales. Maverick’s 2017 income statement and balance sheet are provided below.
Determine the percent of sales forecast factors for Maverick’s operating costs, each asset, as well as each spontaneous liability. Format to 2 decimal places. Only complete for applicable cells. If an account does not have a “forecast factor”, then leave it blank.
Calculate the net profit margin, payout ratio, ROE, and ROA for 2017. Format as a percent to 2 decimal places.
Calculate the AFN (using the AFN equation) for 2018 assuming that Maverick’s net profit margin and payout ratio remain constant in 2018. Sales are assumed to increase by 12%. Format in dollars to 2 decimal places.
Calculate the self-supporting growth rate based on the information in the 2017 statements. Format as a percent to 2 decimal places.
$ -
Please show the steps
Maverick, Inc. Income Statement Year Ended December 31, 2017 Sales $ 3,600,000 Operating Costs $ 3,279,720 EBIT $ 320,280 Interest $ 18,280 EBT $ 302,000 Taxes (40%) $ 120,800 Net Income $ 181,200 Dividends $ 108,000 Addition to Retained Earnings $ 73,200 Special Diviidends Paid$ -
Explanation / Answer
Maverick, Inc. Income Statement Year Ended December 31, 2017 Year Ended December 31, 2017 Increase % Increase in value Year Ended December 31, 2018 Remark Sales $3,600,000 12% $432,000 $4,032,000 Operating Costs $3,279,720 12% $393,566 $3,673,286 EBIT $320,280 $38,434 $358,714 Interest $18,280 $21,018 EBT $302,000 $337,696 Taxes (40%) $120,800 $135,078 Net Income $181,200 $202,617 Dividends $108,000 $118,977 Addition to Retained Earnings $73,200 $83,640 Special Diviidends Paid $ - Pay out Ratio $1.48 $1.42 Devidend/Retained earning Net Profit Margin 5.03% 5.03% Net profit/ Sale Maverick, Inc. Balance Sheet 31-Dec-17 31-Dec-18 Assets Cash 160,714.29 12% 19,285.71 $180,000 Receivables 321,428.57 12% 38,571.43 $360,000 Inventories 642,857.14 12% 77,142.86 $720,000 Total Current Assets 1,125,000.00 135,000.00 $1,260,000 Fixed Assets 1,285,714.29 12% 154,285.71 $1,440,000 Total Assets 2,410,714.29 289,285.71 $2,700,000 Liabilities & Owners' Equity Liabilities Accounts Payable 290,178.57 12% 34,821.43 $325,000 Accruals 71,428.57 12% 8,571.43 $80,000 Notes Payable 50,000.00 12% 6,000.00 $56,000 Line of Credit $ - Total Current Liabilities 411,607.14 49,392.86 $461,000 Long-Term Debt 209,821.43 12% 25,178.57 $235,000 Common Stock 1,800,000.00 $1,800,000 Retained Earnings 120,359.69 $83,640 $204,000 Total Liabilities & Owners' Equity 2,541,788.26 158,211.74 $2,700,000 AFN -- Equation (131,073.97) 131,073.97 Self-Sustaining Growth Rate Dividend Payout Ratio 1.48 1.42 Devidend/Return earning Net Profit Margin 5.03% 5.03% Net profit/Sale ROE 4.09% 4.17% Return on earning/equity ROA 3.04% 3.10% Return on earning/Asset Asset -Liability 1,789,285.71 2,004,000.00 equity