Cheryl Colby, CFO of Charming Florist Ltd., has created the firms pro forma bala

Question

Cheryl Colby, CFO of Charming Florist Ltd., has created the firms pro forma balance sheet for the next fiscal year. Sales are projected to grow by 20 percent to $420 million. Current assets, fixed assets, and short-term debt are 20 percent, 70 percent, and 10 percent of sales, respectively. Charming Florist pays out 20 percent of its net income in dividends. The company currently has $129 million of long-term debt, and $57 million in common stock par value. The profit margin is 14 percent.

1.) Prepare the current balance sheet for the firm using the projected sales figure. (Enter your answers in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations.)

2.) Based on Ms. Colbys sales growth forecast, how much does Charming Florist need in external funds for the upcoming fiscal year? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations.)

3.) Prepare the firms pro forma balance sheet for the next fiscal year. (Enter your answers in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations.)

4.)Calculate the external funds needed. (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations.)

Cheryl Colby, CFO of Charming Florist Ltd., has created the firms pro forma balance sheet for the next fiscal year. Sales are projected to grow by 20 percent to $420 million. Current assets, fixed assets, and short-term debt are 20 percent, 70 percent, and 10 percent of sales, respectively. Charming Florist pays out 20 percent of its net income in dividends. The company currently has $129 million of long-term debt, and $57 million in common stock par value. The profit margin is 14 percent.

1.) Prepare the current balance sheet for the firm using the projected sales figure. (Enter your answers in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations.)

2.) Based on Ms. Colbys sales growth forecast, how much does Charming Florist need in external funds for the upcoming fiscal year? (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations.)

3.) Prepare the firms pro forma balance sheet for the next fiscal year. (Enter your answers in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations.)

4.)Calculate the external funds needed. (Enter your answer in dollars, not millions of dollars, e.g. 1,234,567. Do not round intermediate calculations.)

Explanation / Answer

Charming Florist Amt $ Projceted Sales Growth next years over current sale 20% Projceted next years sales in Millions=S1 420 Current year sales =420/1.20 million 350 Delta Sale = 70 Profit margin =m 14% Current year Profit 49 Dividend payout=d 20% Retention of profit 80% Current Year Retention 39.2 Next years projected profit 58.8 Next years projected profit retention 47.04 (Fixed Asset+current asset)/Sales =A/S 0.9 Current Laibilities/Sales=L/S 0.1 1 Charming Flowers Current Balance sheet Details Amt $ % of sales Assets Current Assets 70 20% Fixed Assets 245 70% Total Assets 315 Liabilities & Equities Short Term debt 35 10% Long Term debt 129 External funding 54.8 balancing figure Equity 57 Retained earning 39.2 Total Equities & Liabilities 315 2 External Fund required =A/S*delta Sales-L/S*delta sales-m*S1*(1-d) =0.9*70-0.1*70-0.14*420*0.8 = $                                               8.96 Million So external fund required =8.96 Million extra 3 Charming Flowers Proforma Balance sheet next year Details Amt $ % of sales Assets Current Assets 84 20% Fixed Assets 294 70% Total Assets 378 Liabilities & Equities Short Term debt 42 10% Long Term debt 129 External funding 63.76 balancing figure Equity 57 Retained earning 86.24 Total Equities & Liabilities 378 4 External fund required as per proforma balance sheet is $8.96 million extra

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