PRINCIPLES OF MANAGERIAL FINANCE (SUBSCR
15th Edition
ISBN: 9780137695621
Author: SMART
Publisher: PEARSON C
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Textbook Question
Chapter 4, Problem 4.20P
Learning Goal 5
P4-20 Integrative: Pro forma statements Red Queen Restaurants wishes to prepare financial plans. Use the financial statements and the other information provided below to prepare the financial plans. The following financial data are also available:
- 1. The firm has estimated that its sales for 2020 will be $900,000.
- 2. The firm expects to pay $35,000 in cash dividends in 2020.
- 3. The firm wishes to maintain a minimum cash balance of $30,000.
- 4. Accounts receivable represent approximately 18% of annual sales.
- 5. The firm's ending inventory will change directly with changes in sales in 2020.
- 6. A new machine costing $42,000 will be purchased in 2020. Total
depreciation for 2020 will be $17,000. - 7. Accounts payable will change directly in response to changes in sales in 2020.
- 8. Taxes payable will equal one-fourth of the tax liability on the pro forma income statement.
- 9. Marketable securities, other current liabilities, long-term debt, and common stock will remain unchanged.
- a. Prepare a pro forma income statement for the year ended December 31, 2020, using the percent-of-sales method.
- b. Prepare a pro forma
balance sheet dated December 31, 2020, using the judgmental approach. - c. Analyze these statements, and discuss the resulting external financing required.
Red Queen Restaurants Income Statement for the Year Ended December 31 2019
| Sales revenue | $800,000 |
| Less: Cost of goods sold | 600,000 |
| Gross profits | $200,000 |
| Less: Operating expenses | 100,000 |
| Net profits before taxes | $100,000 |
| Less: Taxes (rate = 40%) | 40,000 |
| Net profits after taxes | $60,000 |
| Less: Cash dividends | 20,000 |
| To |
$40.000 |
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Windswept, Incorporated
2024 Income Statement
Cost of goods sold
Depreciation
($ in millions)
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Interest paid
Taxable income
Taxes
Net income
$ 14,150
8,150
515
$ 5,485
108
$ 5,377
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($ in millions)
2023
2024
2023
2024
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$ 300
$ 330
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$ 1,980
$1,955
1,190
1,090
Long-term debt
1,110
1,430
Inventory
2,120
1,795
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3,440
3,080
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Chapter 4 Solutions
PRINCIPLES OF MANAGERIAL FINANCE (SUBSCR
Ch. 4.1 - Prob. 4.1RQCh. 4.1 - Prob. 4.2RQCh. 4.2 - Briefly describe the first four modified...Ch. 4.2 - Describe the overall cash flow through the firm in...Ch. 4.2 - Prob. 4.5RQCh. 4.2 - 4-B Why is depreciation (as well as amortization...Ch. 4.2 - Prob. 4.7RQCh. 4.2 - Prob. 4.8RQCh. 4.2 - Prob. 4.9RQCh. 4.3 - Prob. 4.10RQ
Ch. 4.3 - Prob. 4.11RQCh. 4.3 - Prob. 4.12RQCh. 4.3 - What is the cause of uncertainty in the cash...Ch. 4.4 - Prob. 4.14RQCh. 4.5 - Prob. 4.15RQCh. 4.5 - Prob. 4.16RQCh. 4.6 - Prob. 4.17RQCh. 4.6 - What is the significance of the plug figure,...Ch. 4.7 - Prob. 4.19RQCh. 4.7 - Prob. 4.20RQCh. 4 - Opener-in-Review The chapter opener described a...Ch. 4 - Learning Goals 2, 3 ST4-1 Depreciation and cash...Ch. 4 - Prob. 4.2STPCh. 4 - Prob. 4.3STPCh. 4 - Prob. 4.1WUECh. 4 - Prob. 4.2WUECh. 4 - Learning Goal 3 E4-3 Determine the operating cash...Ch. 4 - Prob. 4.4WUECh. 4 - Learning Goal 5 E4-5 Rimier Corp. forecasts sales...Ch. 4 - Prob. 4.1PCh. 4 - Learning Goal 2 P4-2 Depreciation In early 2019,...Ch. 4 - Prob. 4.3PCh. 4 - Learning Goals 2, 3 P4-4 Depreciation and...Ch. 4 - Learning Goal 3 P4-5 Classifying inflows and...Ch. 4 - Prob. 4.6PCh. 4 - Learning Goal 4 P4-8 Cash receipts A firm has...Ch. 4 - Learning Goal 4 P4-9 Cash disbursements schedule...Ch. 4 - Learning Goal 4 P4-10 Cash budget: Basic Grenoble...Ch. 4 - Prob. 4.11PCh. 4 - Learning Goal 4 P4-12 Cash budget: Advanced The...Ch. 4 - Prob. 4.13PCh. 4 - Prob. 4.14PCh. 4 - Learning Goal 4 P4-15 Multiple cash budgets:...Ch. 4 - Learning Goal 5 P4-16 Pro forma income statement...Ch. 4 - Learning Goal 5 P4-17 Pro forma income statement:...Ch. 4 - Learning Goal 5 P4-18 Pro forma balance sheet:...Ch. 4 - Learning Goal 5 P4-19 Pro forma balance sheet...Ch. 4 - Learning Goal 5 P4-20 Integrative: Pro forma...Ch. 4 - Learning Goal 5 P4-21 Integrative: Pro forma...Ch. 4 - Prob. 4.22PCh. 4 - Prob. 1SE
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