Use the following industry average ratios to construct a pro forma balance sheet
ID: 2650835 • Letter: U
Question
Use the following industry average ratios to construct a pro forma balance sheet for Carlos Menza, Inc.
Total asset turnover - 1.7 times
Average collection period (assume a 365-day year) - 8.9 days
Fixed asset turnover - 4.6 times
Inventory turnover (based on cost of goods sold) - 2.8 times
Current ratio - 2.1 times
Sales (all on credit) - $3.71 million
Cost of goods sold - 71% of sales
Debt ratio - 54%
1. The company's total assets are $___________(round to the nearest dollar)
2. The company's fixed assets are $___________(round to the nearest dollar)
3. The company'saccounts recievable is $___________(round to the nearest dollar)
4. The company's inventories are $___________(round to the nearest dollar)
5. The company's current liabities are $___________(round to the nearest dollar)
6. The company's total liabilities are $___________(round to the nearest dollar)
7. Pro Forma Balance Sheet
Cash _____ Current liabilities _____
Inventory _____ Long-term debt _____
Accounts receivable _____ Common stock plus _____
Net fixed assets _____ Retained earnings _____
Total $ _____ Total $ _____
Explanation / Answer
Answer:1. Total asset turnover= Sales/Total Assest
1.6 times=4.26 million/Total assest
Total assest=4260000/1.6
=2662500
Answer:2 Fixed asset turnover=Sales/Fixed asset
5.1 times =4260000/Fixed asset
Fixed asset=835294.12
Answer:3 DTR=365 days/Average collection days
=365/8.8days
=41.48 times
DTR=Credit sales/Average debtors
Average Debtor=4260000/41.48
=102700.096
Answer:4 ITR=Cost of goods sold/ Average inventory
3.2 times=2982000/Average inventory
Average inventory=931875
Answer:5 Current ratio= current asset/current liabilities
1.8 times=1827205.88/Current liabilities
Current liabilities=1015114.38
Answer:6 Debt ratio= Total liabilities/Total asset
0.47*2662500=Total liabilities
Total liabilities=1251375
Answer:7 Balance sheet
Asset Amount ($) Liabilities Amount ($) Cash 792630.784 Current liabilities 1015114.38 Inventory 931875 Long term debt 236260.62 Accounts receivable 102700.096 Common stockPlus retained earnings 1411125 Net FA 835294.12 Total 2662500 Total 2662500