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Noah’s ark video game expects sales to grow by 25% next year. Assume that it pays out 95% of its net income. Using the following statements and the percent of sales method, forecast the amount of net new financing needed.

Noah’s ark video game expects sales to grow by 25% next year. Assume that it pays out 95% of its net income. Using the following statements and the percent of sales method, forecast the amount of net new financing needed.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Noah’s ark video game expects sales to grow by 25% next year. Assume that it pays out 95% of its net income. Using the following statements and the percent of sales method, forecast the amount of net new financing needed.
### Understanding the Balance Sheet The balance sheet is a fundamental financial statement that provides a snapshot of a company's financial position at a specific point in time. It is divided into three main sections: Assets, Liabilities, and Equity. Below is a detailed breakdown of each section from the provided balance sheet: #### Balance Sheet (Year 0) **Assets** 1. **Cash and Equivalents**: $25,000 - Liquid assets that can be quickly converted to cash. 2. **Accounts Receivable**: $12,000 - Money owed to the company by its customers from sales made on credit. 3. **Inventories**: $5,000 - The value of the company’s products that have not yet been sold. 4. **Total Current Assets**: $42,000 - The sum of all short-term assets. It is calculated as follows: - Cash and Equivalents + Accounts Receivable + Inventories 5. **Property, Plant, and Equipment**: $120,000 - The value of long-term assets such as buildings and machinery. 6. **Total Assets**: $162,000 - The cumulative value of all assets owned by the company. It is calculated as follows: - Total Current Assets + Property, Plant, and Equipment **Liabilities and Equity** 1. **Accounts Payable**: $45,000 - The amount the company owes to its suppliers and creditors. 2. **Debt**: $48,000 - The total short-term and long-term debt that the company has incurred. 3. **Total Liabilities**: $93,000 - The company's total obligations, calculated as follows: - Accounts Payable + Debt 4. **Stockholders' Equity**: $69,000 - The residual interest in the assets of the company after deducting liabilities. It represents the ownership interest of shareholders in the company. 5. **Total Liabilities and Equity**: $162,000 - The sum of total liabilities and equity, which should balance with the total assets. ### Graphical Representation (Hypothetical Explanation) While the provided image does not include a graphical representation, here is a description of how you might visualize it: - **Bar Graph of Assets and Liabilities**: Create two bar graphs, one for total assets and another for total liabilities and equity. Each graph
Transcribed Image Text:### Understanding the Balance Sheet The balance sheet is a fundamental financial statement that provides a snapshot of a company's financial position at a specific point in time. It is divided into three main sections: Assets, Liabilities, and Equity. Below is a detailed breakdown of each section from the provided balance sheet: #### Balance Sheet (Year 0) **Assets** 1. **Cash and Equivalents**: $25,000 - Liquid assets that can be quickly converted to cash. 2. **Accounts Receivable**: $12,000 - Money owed to the company by its customers from sales made on credit. 3. **Inventories**: $5,000 - The value of the company’s products that have not yet been sold. 4. **Total Current Assets**: $42,000 - The sum of all short-term assets. It is calculated as follows: - Cash and Equivalents + Accounts Receivable + Inventories 5. **Property, Plant, and Equipment**: $120,000 - The value of long-term assets such as buildings and machinery. 6. **Total Assets**: $162,000 - The cumulative value of all assets owned by the company. It is calculated as follows: - Total Current Assets + Property, Plant, and Equipment **Liabilities and Equity** 1. **Accounts Payable**: $45,000 - The amount the company owes to its suppliers and creditors. 2. **Debt**: $48,000 - The total short-term and long-term debt that the company has incurred. 3. **Total Liabilities**: $93,000 - The company's total obligations, calculated as follows: - Accounts Payable + Debt 4. **Stockholders' Equity**: $69,000 - The residual interest in the assets of the company after deducting liabilities. It represents the ownership interest of shareholders in the company. 5. **Total Liabilities and Equity**: $162,000 - The sum of total liabilities and equity, which should balance with the total assets. ### Graphical Representation (Hypothetical Explanation) While the provided image does not include a graphical representation, here is a description of how you might visualize it: - **Bar Graph of Assets and Liabilities**: Create two bar graphs, one for total assets and another for total liabilities and equity. Each graph
### Financial Statements Overview This section provides a detailed transcription of an income statement and balance sheet for the fiscal year labeled "Year 0". These documents are essential for understanding the financial health and performance of a business. #### Income Statement **Sales** - Amount: 320,000 **Costs Except Depreciation** - Amount: (150,000) **EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)** - Amount: 170,000 **Depreciation** - Amount: (15,000) **EBIT (Earnings Before Interest and Taxes)** - Amount: 155,000 **Interest Expense (net)** - Amount: (3,000) **Pretax Income** - Amount: 152,000 **Income Tax** - Amount: (53,200) **Net Income** - Amount: 98,800 #### Balance Sheet **Assets** - **Cash and Equivalents** - Amount: 25,000 - **Accounts Receivable** - Amount: 12,000 - **Inventories** - Amount: 5,000 - **Total Current Assets** - Amount: 42,000 - **Property, Plant, and Equipment** - Amount: 130,000 ### Explanation of Terms 1. **Sales**: Total revenue generated from the sale of goods and services. 2. **Costs Except Depreciation**: All operating expenses excluding depreciation. 3. **EBITDA**: A measure of a company's overall financial performance. 4. **Depreciation**: The reduction in the value of assets over time. 5. **EBIT**: A measure of the profit a company makes from its operations. 6. **Interest Expense**: Cost incurred by an entity for borrowed funds. 7. **Pretax Income**: Income before deductions for taxes. 8. **Income Tax**: Taxes imposed on earned income. 9. **Net Income**: The total profit of a company after all expenses and taxes have been deducted. 10. **Cash and Equivalents**: The total of a company's cash and other assets that are easily convertible to cash. 11. **Accounts Receivable**: Money owed to a company by its debtors. 12. **Inventories**: The raw materials, work-in-progress goods, and finished goods considered to be part of a
Transcribed Image Text:### Financial Statements Overview This section provides a detailed transcription of an income statement and balance sheet for the fiscal year labeled "Year 0". These documents are essential for understanding the financial health and performance of a business. #### Income Statement **Sales** - Amount: 320,000 **Costs Except Depreciation** - Amount: (150,000) **EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)** - Amount: 170,000 **Depreciation** - Amount: (15,000) **EBIT (Earnings Before Interest and Taxes)** - Amount: 155,000 **Interest Expense (net)** - Amount: (3,000) **Pretax Income** - Amount: 152,000 **Income Tax** - Amount: (53,200) **Net Income** - Amount: 98,800 #### Balance Sheet **Assets** - **Cash and Equivalents** - Amount: 25,000 - **Accounts Receivable** - Amount: 12,000 - **Inventories** - Amount: 5,000 - **Total Current Assets** - Amount: 42,000 - **Property, Plant, and Equipment** - Amount: 130,000 ### Explanation of Terms 1. **Sales**: Total revenue generated from the sale of goods and services. 2. **Costs Except Depreciation**: All operating expenses excluding depreciation. 3. **EBITDA**: A measure of a company's overall financial performance. 4. **Depreciation**: The reduction in the value of assets over time. 5. **EBIT**: A measure of the profit a company makes from its operations. 6. **Interest Expense**: Cost incurred by an entity for borrowed funds. 7. **Pretax Income**: Income before deductions for taxes. 8. **Income Tax**: Taxes imposed on earned income. 9. **Net Income**: The total profit of a company after all expenses and taxes have been deducted. 10. **Cash and Equivalents**: The total of a company's cash and other assets that are easily convertible to cash. 11. **Accounts Receivable**: Money owed to a company by its debtors. 12. **Inventories**: The raw materials, work-in-progress goods, and finished goods considered to be part of a
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