ABC company financial manager believes that sales in 2012 could rise by as much
ID: 2651615 • Letter: A
Question
ABC company financial manager believes that sales in 2012 could rise by as much as 20% or by as little as 5%.
Recalculate the first-stage pro forma financial statements under these two assumptions and calculate the required external financing. (All figures are in thousands.) (Enter your answers in thousands.)
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.)
ABC company financial manager believes that sales in 2012 could rise by as much as 20% or by as little as 5%.
Explanation / Answer
Base case 20% growth 5% growth Income statement Revenue 6,000 7,200 6,300 cost of good sold 5,400 6,480 5,670 EBIT 600 720 630 Interest 120 144 126 Earnings before taxes 480 576 504 State and federal taxes 192 230 202 Net income 288 346 302 Dividends 192 230 202 retained earnings 96 115 101 Balance sheet Net working capital 600 720 630 Fixed assets 2,400 2,880 2,520 Total assets 3,000 3,600 3,150 Long term debt 1,200 1,200 1,200 Shareholder's equity 1,800 1,915 1,901 Total liabilities 3,000 3,115 3,101 Required external financing 485 49 Balance sheet Net working capital 600 720 630 Fixed assets 2,400 2,880 2,520 Total assets 3,000 3,600 3,150 Long term debt 1,200 1,200 1,200 Shareholder's equity 1,800 2,400 1,950 Total liabilities 3,000 3,600 3,150