The Owl Corporation is planning for 20x2. The firm expects to have the following

Question

The Owl Corporation is planning for 20x2. The firm expects to have the following financial result in 20x1 ($000). INCOME STATEMENT Revenue COGS Gross Margin Expenses EBIT Interest EBT Income tax Net Income $43,435 12,382 $31,053 15,324 $15,729 $ 1,591 $14,138 5,655 $ 8,483 100.0 28.5 71.5 35.3 36.2 3.7 32.5 13.0 19.5 BALANCE SHEET Assets Liabilities & Equity s 1,783 883 Cash Accts. Rec. Inventory Curr. Assets Fixed Assets Gross Accum. Dep.(15,634) $1,008 Accts. Pay. 6,033 Accruals 2,476 $9,517 Curr. Liab. s 2,666 Capital $11,527 8,616 $20,143 $22,809 $28,926 Debt Equity $13,292 $22,809 Total L & E Total Assets Management has made the following planning assumptions Income Statement Revenue will grow by 10%. The cost ratio will improve to 36% of revenues. * Expenses will be held to 49% of revenues. Balance Sheet . The year end cash balance will be $1.8 million. The ACP will improve to 40 days from the current 50. . Inventory turnover will improve to 9X from 5X. . Trade payables will continue to be paid in 60 days. . New capital spending will be $5 million

Explanation / Answer

Income Statement $ % Revenue 43435*110% 47779 100 COGS 17200 36 Gross Margin 30578 64 Expenses 23411 49 EBIT 7167 15 Interest 11527*11% 1268 2.65 EBT 5899 12.35 Income Tax @ 40% 2360 4.94 Net Income 3539 7.41 Balance Sheet Assets Liabilities &Equity Cash 1800 Accts.Payables17200*70%50/40 9632 Accs. Rec.6033/43435*47779 6636 Accruals 883 Inventory2476/5*9 4457 Curr. Liab. 10515 Current Assets 12893 Capital Fixed Assets Debt 11527 Gross (28926+5000) 33926 Equity 8616 Acc.depn.(15634+1818+500) 17952 20143 15974 Net Income 7 Rounding off Adj. 2 Total Assets 30667 Total L& E 30667

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