Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN: 9781337395083
Author: Eugene F. Brigham, Phillip R. Daves
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 9P
a)
Summary Introduction
To determine: Projected financial statement of the company for 2019.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
Pro forma balance sheet Peabody & Peabody has 2019 sales of $10 million. It wishes to analyze expected performance and financing needs for 2021, which is 2 years ahead. Given the following information, respond to parts a and b.
(1) The percent of sales for items that vary directly with sales are as follows: Accounts receivable, 12% Inventory, 18% Accounts payable, 14% Net profit margin, 3%
(2) Marketable securities and other current liabilities are expected to remain unchanged.
(3) A minimum cash balance of $480,000 is desired.
(4) A new machine costing $650,000 will be acquired in 2020, and equipment costing $850,000 will be purchased in 2021. Total depreciation in 2020 is forecast as $290,000, and in 2021 $390,000 of depreciation will be taken.
(5) Accruals are expected to rise to $500,000 by the end of 2021.
(6) No sale or retirement of long-term debt is expected.
(7) No sale or repurchase of common stock is expected.
(8) The dividend payout of 50% of net profits is expected to…
Pro forma balance sheet Peabody & Peabody has
2019
sales of
$10.5
million. It wishes to analyze expected performance and financing needs for
2021—2
years ahead. Given the following information, respond to parts a. and b.
(1) The percents of sales for items that vary directly with sales are as follows: Accounts receivable;
11.9%,
Inventory;
17.7%;
Accounts payable,
13.6%;
Net profit margin,
3.5%.
(2) Marketable securities and other current liabilities are expected to remain unchanged.
(3) A minimum cash balance of
$482,000
is desired.
(4) A new machine costing
$653,000
will be acquired in
2020,
and equipment costing
$848,000
will be purchased in
2021.
Total depreciation in
2020
is forecast as
$288,000,
and in
2021
$388,000
of depreciation will be taken.
(5) Accruals are expected to rise to
$504,000
by the end of
2021.
(6) No sale or retirement of long-term debt is expected.
(7) No sale or repurchase of common stock is expected.
(8) The dividend payout of…
Stevens Textile Corporation’s 2019 financial statements are shown here. Stevens grew rapidly in 2019 and financed the growth with notes payable and long-term bonds. Stevens expects sales to grow by 15% in the next year but will finance the growth with a line of credit, not notes payable or long-term bonds. Use the forecasted financial statement methodto forecast a balance sheet and income statement for December 31, 2020. The interest rate on all debt is 10%, and cash earns no interest income. The line of credit is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year. Use the forecasted income statement to determinethe addition to retained earnings. Assume that the company was operating at full capacity in 2019, that it cannot sell off any of its fixed assets, and that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales.a. What is the…
Chapter 9 Solutions
Intermediate Financial Management (MindTap Course List)
Ch. 9 - Define each of the following terms:
Operating...Ch. 9 - Prob. 2QCh. 9 - Prob. 3QCh. 9 - Prob. 4QCh. 9 - Prob. 5QCh. 9 - Prob. 6QCh. 9 - Broussard Skateboard’s sales are expected to...Ch. 9 - AFN Equation Refer to Problem 9-1. What would be...Ch. 9 - AFN Equation Refer to Problem 9-1. Return to the...Ch. 9 - Sales Increase Maggies Muffins Bakery generated 5...
Ch. 9 - Long-Term Financing Needed At year-end 2018,...Ch. 9 - Additional Funds Needed
The Booth Company’s sales...Ch. 9 - Forecasted Statements and Ratios Upton Computers...Ch. 9 - Financing Deficit
Stevens Textile Corporation’s...Ch. 9 - Prob. 9PCh. 9 - Hatfield Medical Supplys stock price had been...Ch. 9 - Prob. 2MCCh. 9 - Define the term capital intensity. Explain how a...
Knowledge Booster
Similar questions
- Financing Deficit Stevens Textile Corporation’s 2018 financial statements are shown here: Balance Sheet as of December 31, 2018 (Thousands of Dollars) Income Statement for December 31, 2018 (Thousands of Dollars) Suppose 2019 sales are projected to increase by 15% over 2018 sales. Use the forecasted financial statement method to forecast a balance sheet and income statement for December 31, 2019. The interest rate on all debt is 10%, and cash earns no interest income. Assume that all additional debt in the form of a line of credit is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year. Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2018, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the additional funds needed. What is the resulting total forecasted amount of the line of credit? In your answers to parts a and b, you should not have charged any interest on the additional debt added during 2019 because it was assumed that the new debt was added at the end of the year. But now suppose that the new debt is added throughout the year. Don’t do any calculations, but how would this change the answers to parts a and b?arrow_forwardStevens Textile Corporations 2019 financial statements are shown here. Stevens grew rapidly in 2019 and financed the growth with notes payable and long-term bonds. Stevens expects sales to grow by 15% in the next year but will finance the growth with a line of credit, not notes payable or long-term bonds. Use the forecasted financial statement method to forecast a balance sheet and income statement for December 31, 2020. The interest rate on all debt is 10%, and cash earns no interest income. The line of credit is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year. Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2019, that it cannot sell off any of its fixed assets, and that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. a. What is the projected value for earnings before interest and taxes? b. What is the projected value for pre-tax earnings? c. What is the projected net income? d. What is the projected addition to retained earnings? e. What is the projected value of total current assets? f. What is the projected value of total assets? g. What is the projected sum of accounts payable, accruals, and notes payable? h. What is the forecasted line of credit? Balance Sheet as of December 31, 2019 (Thousands of Dollars) Income Statement for December 31, 2019 (Thousands of Dollars)arrow_forwardLONG-TERM FINANCING NEEDED At year-end 2019, total assets for Arrington Inc. were 1.8 million and accounts payable were 450,000. Sales, which in 2019 were 3.0 million, are expected to increase by 25% in 2020. Total assets and accounts payable are proportional to sales, and that relationship will be maintained; that is, they will grow at the same rate as sales. Arrington typically uses no current liabilities other than accounts payable. Common stock amounted to 500,000 in 2019, and retained earnings were 475,000. Arrington plans to sell new common stock in the amount of 130,000. The firms profit margin on sates is 5%; 35% of earnings will be retained. a. What were Arringtons total liabilities in 2019? b. How much new long-term debt financing will be needed in 2020? (Hint: AFN - New stock = New long-term debt.)arrow_forward
- Assume the company uses the AFN formula and all additional funds needed (AFN) will come from issuing new long-term debt. Given its forecast, how much long-term debt will the company have to issue in 2023? Lux Co. has the following balance sheet as of December 31, 2022arrow_forwardLong-Term Financing Needed At year-end 2018, Wallace Landscaping's total assets were $2.37 million, and its accounts payable were $360,000. Sales, which in 2018 were $2.1 million, are expected to increase by 10% in 2019. Total assets and accounts payable are proportional to sales, and that relationship will be maintained. Wallace typically uses no current liabilities other than accounts payable. Common stock amounted to $640,000 in 2018, and retained earnings were $345,000. Wallace has arranged to sell $90,000 of new common stock in 2019 to meet some of its financing needs. The remainder of its financing needs will be met by issuing new long-term debt the end of 2019. (Because the debt is added at the end of the year, there will be no additional interest expense due to the new debt.) Its net profit margin on sales is 5%, and 45% of earnings will be paid out as dividends. a. What was Wallace's total long-term debt in 2018? Do not round intermediate calculations. Round your answer to the…arrow_forwardTopic: Financial Planning & Forecasting At year-end 2018, total assets for ABC Inc. were $1.8 million and accounts payable were $450,000. Sales, which in 2018 were $3 are expected to increase by 25% in 2019. Total assets and accounts payable are proportional to sales (grow at the same rate). ABC typically uses no current liabilities other than accounts payable. Common stock amounted to $500,000 in 2018, and retained earnings were $475,000. ABC plans to sell new common stock in the amount of $130,000. The firm's profit margin on sales is 5%; 35% of earnings will be retained. a. What were ABC's total liabilities in 2018? b. How much new long-term debt financing will be needed in 2019? (Hint: AFN - New stock = New long-term debt)arrow_forward
- Quantitative Problem 1: Beasley Industries' sales are expected to increase from $4 million in 2019 to $5 million in 2020, or by 25%. Its assets totaled $3 million at the end of 2019. Beasley is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2019, current liabilities are $760,000, consisting of $170,000 of accounts payable, $500,000 of notes payable, and $90,000 of accrued liabilities. Its profit margin is forecasted to be 4%, and its dividend payout ratio is 50%. Using the AFN equation, forecast the additional funds Beasley will need for the coming year. Do not round intermediate calculations. Round your answer to the nearest dollar. $ The AFN equation assumes that ratios remain constant. However, firms are not always operating at full capacity so adjustments need to be made to the existing asset forecast. Excess capacity adjustments are changes made to the existing asset forecast because the firm is not operating at full capacity. For…arrow_forwardQuantitative Problem 1: Beasley Industries' sales are expected to increase from $5 million in 2019 to $6 million in 2020, or by 20%. Its assets totaled $2 million at the end of 2019. Beasley is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2019, current liabilities are $790,000, consisting of $160,000 of accounts payable, $350,000 of notes payable, and $280,000 of accrued liabilities. Its profit margin is forecasted to be 4%, and its dividend payout ratio is 60%. Using the AFN equation, forecast the additional funds Beasley will need for the coming year. Do not round intermediate calculations. Round your answer to the nearest dollar.$ The AFN equation assumes that ratios remain constant. However, firms are not always operating at full capacity so adjustments need to be made to the existing asset forecast. Excess capacity adjustments are changes made to the existing asset forecast because the firm is not operating at full capacity. For…arrow_forwardPrepare the statement of retained earnings TPR had one major creditor at the beginning of 2020. One of the major banks loaned TPR $500,000 for ongoing operating costs. The outstanding portion of the loan was $400,000 at the beginning of the vear. The bank requires TPR to maintain a current ratio of 1.8:1 or the loan may become immediately repayable. It also requires TPR to have a debt to total asset ratio of no greater than 55%. Information required for adjusting journal entries: 1. There is no interest accrual required for the mortgage loan on the building because payment was made on December 31. The loan for the balloon machine carries an interest rate of 5% and has been outstanding for 15 days. 2. Depreciation of $800 on the cash register machines and $15,000 on the other equipment has not yet been recorded. 3. A dividend of $2,000 was declared but has not been recorded. It will be paid in March 2021. 4. The monthly electricity bill of $2,000 was received in early January 2021.…arrow_forward
- Abbreviated financial statements for Archimedes Levers are shown in the table below. Assume sales and expenses increase by 13% in 2022 and all assets and liabilities increase correspondingly. Income Statement Sales Costs, including interest Net income $ 6,800 4,900 $ 1,900 2021 Balance Sheet, Year-End 2020 Net assets $ 5,916 $ 5,500 Total $ 5,916 $ 5,500 Debt Equity Total 2021 $ 2,516 3,400 $ 5,916 2020 $ 2,433 3,067 $ 5,500 a. If the payout ratio is set at 60% and no external debt or equity is to be issued, what is the maximum possible growth rate for Archimedes? b. If the payout ratio is set at 60% and the firm maintains a fixed debt ratio but issues no equity, what is the maximum possible growth rate for Archimedes? Note: For all requirements, do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. a. Maximum possible growth rate b. Maximum possible growth rate % %arrow_forwardIntro The whole year income statement and end of year balance sheet numbers are provided for 2020. As CFO, you are to forecast 2021 numbers (blank column) based on the following assumptions: Income Balance sheet statement ($ million) ($ million) Current Sales 1,000 420 Debt 630 assets Fixed Costs 850 1,680 Equity 1,470 ? assets Net Total 150 2,100 Total 2,100 income assets Sales, assets and costs are expected to grow by 15% in 2021. The company is expected to pay NO dividend in 2021, and will keep the debt balance unchanged. Part 1 - Attempt 1/2 for 10 pts. In the forecast, which of the following financial ratios are assumed unchanged throughout 2020-2021? Must select ALL to earn points. Check all that apply: O debt-equity ratio O profit margin total asset turnover O ROE O gross profit margin accounts receivable turnoverarrow_forwardA company has the following items for the fiscal year 2020: Total Equity = 15 million Total Assets = 30 million EBIT = 4 million Interest expense = 1 million Calculate the company’s equity multiplier and interest coverage ratio Write the formula for the following ratios and what each ratio measures: Asset turnover Inventory Turnover and Days Inventory Receivable Collection Period Write down the DuPont framework. How would you explain to your non-MBA non-Finance friend about the DuPont framework and why it is important? A company has the following items for the fiscal year 2020: Revenue = 10 million EBIT = 4 million Net income = 2 million Total Equity = 15 million Total Assets = 30 million Calculate the company’s net profit margin, asset turnover, equity multiplier and ROE Explain cash conversion cycle and why it is important to companies? Is it possible that a company has a negative cash cycle? Is it a good thing or a bad thing? A company has days of inventory 80…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Fundamentals Of Financial Management, Concise Edi...FinanceISBN:9781337902571Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Fundamentals Of Financial Management, Concise Edi...
Finance
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT