The following are the first stage and second stage pro forma financial statement
ID: 2497731 • Letter: T
Question
The following are the first stage and second stage pro forma financial statements of Executive Fruit Company for the year ended December 2015.
How would Executive Fruit’s financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.)
Dividends fall by $ ___________. Therefore, the requirement for external financing falls from $ ____________ to $ ____________ . On the other hand, shareholders' equity will be increased by $_______________ .
The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.):
The following is the financial statement of Executive Fruit Company for the year ended December 2014.Explanation / Answer
Executive Fruit Company Details Amt '000 $ Current Dividend projected 2015. 216 Net Income 324 Changed dividend payout ratio =1/3 Changed Dividend amount 108 a Dividends fall by $108,000 External financing falls from $192,000 to $84,000 Shareholders Equity will be increased by $108,000 Executive Fruit Company PRO FORMA BALANCE SHEET (Year-End, 2015) (Figures in $ Thousands) Assets Net working capital $ 660 Fixed assets 2,640 Total assets $ 3,300 Liabilities and shareholders' equity Long-term debt $ 1,200 Shareholders' equity 2,016 Total liabilities and shareholders' equity $ 3,216 Required external financing $ 84 Right Hand side of the Balance sheet will be Details Amt '000 $ Long-term debt 1,284 Shareholders' equity 2,016 Total 3,300
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