Principles of Managerial Finance, Student Value Edition Plus MyLab Finance with Pearson eText - Access Card Package (15th Edition) (Pearson Series in Finance)
15th Edition
ISBN: 9780134830209
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Textbook Question
Chapter 4, Problem 4.21P
Learning Goal 5
P4-21 Integrative: Pro forma statements Provincial Imports Inc. has assembled past (2019) financial statements (income statement and
Provincial Imports Inc. Income Statement for the Year Ended December 31, 2019
| Sales revenue | $5,000,000 |
| Less: Cost of goods sold | 2,750,000 |
| Gross profits | $2,250,000 |
| Less: Operating expenses | 850,000 |
| Operating profits | $1,400,000 |
| Less: Interest expense | 200,000 |
| Net profits before taxes | $1,200,000 |
| Less: Taxes (rate = 40%) | 480,000 |
| Net profits after taxes | $ 720,000 |
| Less: Cash dividends | 288,000 |
| To |
$ 432,000 |
Information related to financial projections for the year 2020 is as follows:
- 1. Projected sales are $6,000,000.
- 2. Cost of goods sold in 2019 includes $1,000,000 in fixed costs.
- 3. Operating expense in 2019 includes $250,000 in fixed costs.
- 4. Interest expense will remain unchanged
- 5. The firm will pay cash dividends amounting to 40% of net profits after taxes.
- 6. Cash and inventories will double.
- 7. Marketable securities, notes payable, long-term debt, and common stock will remain unchanged.
- 8. Accounts receivable, accounts payable, and other current liabilities will change in direct response to the change in sales
- 9. A new computer system costing $356,000 will be purchased during the year. Total
depreciation expense for the year will be $110,000. - 10. The tax rate will remain at 40%.
- a. Prepare a pro forma income statement for the year ended December 31, 2020, using the fixed cost data given to improve the accuracy of the percent-of-sales method.
- b. Prepare a pro forma balance sheet as of December 31, 2020, using the information given and the judgmental approach. Include a reconciliation of the retained earnings account.
- c. Analyze these statements, and discuss the resulting external financing required.
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Chapter 4 Solutions
Principles of Managerial Finance, Student Value Edition Plus MyLab Finance with Pearson eText - Access Card Package (15th Edition) (Pearson Series in Finance)
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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