Timmy Turner, Inc. is a company that produces toys about fairies. The company has a wide range of products, the most famous of which are the characters Wanda and Cosmo. They have one large plant in Dimmsdale, California, which operates at 89% capacity rates. Since the outbreak of the COVID-19 pandemic, companies need to revise their financial projections. Below, the companies are attaching their income statement and balance sheet in 2019. They reduce the company’s sales growth from 50% to 25%. In projecting its financial statements, the company assumes that all expenses, current assets, and current liabilities that do not have interest will increase following sales growth. Interest expense will remain constant; the tax rate and dividend payout rate will also remain constant. As a financial manager, you need to: a. Prepare Projected Income Statement and Projected Balance Sheet using the percentage of sales approach. b. Calculate the external financing needed!

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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3. Timmy Turner, Inc. is a company that produces toys about fairies. The company has a wide range of products, the most famous of which are the characters Wanda and Cosmo. They have one large plant in Dimmsdale, California, which operates at 89% capacity rates. Since the outbreak of the COVID-19 pandemic, companies need to revise their financial projections. Below, the companies are attaching their income statement and balance sheet in 2019. They reduce the company’s sales growth from 50% to 25%. In projecting its financial statements, the company assumes that all expenses, current assets, and current liabilities that do not have interest will increase following sales growth. Interest expense will remain constant; the tax rate and dividend payout rate will also remain constant. As a financial manager, you need to:

a. Prepare Projected Income Statement and Projected Balance Sheet using the percentage of sales approach.

b. Calculate the external financing needed!

Timmy Turner, Inc
Income Statement 2019
Sales
$ 215,000.00
$ 125,000.00
$ 90,500.00
$ 7,500.00
$ 83,000.00
$ 23,240.00
$ 59,760.00
Cost
EBIT
Interest
EBT
Tax
Net Income
$ 32,868.00
Retained Earnings $26,892.00
Dividend
Transcribed Image Text:Timmy Turner, Inc Income Statement 2019 Sales $ 215,000.00 $ 125,000.00 $ 90,500.00 $ 7,500.00 $ 83,000.00 $ 23,240.00 $ 59,760.00 Cost EBIT Interest EBT Tax Net Income $ 32,868.00 Retained Earnings $26,892.00 Dividend
Timmy Turner, Inc
Balance Sheet 2019
Liabilities and Equity
Assets
Current Assets
Current Liabilities
$ 138,000.00
73,000
17,000
90,000
Cash
AP
AR
89,000.00
NP
$ 254,000.00
$ 481,000.00
Inventory
Total Current Liabilities
Total Current Assets
Fixed Asstes
Long Term Debt
298,000
PPE
$ 753,000.00
Stockholder's Equity
Common Stocks
225,000
Retained Earning
621,000
846,000
Total Equity
Total Assets
$1,234,000.00
Total Liabilities and Equity
1,234,000
Transcribed Image Text:Timmy Turner, Inc Balance Sheet 2019 Liabilities and Equity Assets Current Assets Current Liabilities $ 138,000.00 73,000 17,000 90,000 Cash AP AR 89,000.00 NP $ 254,000.00 $ 481,000.00 Inventory Total Current Liabilities Total Current Assets Fixed Asstes Long Term Debt 298,000 PPE $ 753,000.00 Stockholder's Equity Common Stocks 225,000 Retained Earning 621,000 846,000 Total Equity Total Assets $1,234,000.00 Total Liabilities and Equity 1,234,000
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