1,000.00 I have come to it that I suck at financing and accounting. Can you plea
ID: 2740068 • Letter: 1
Question
1,000.00
I have come to it that I suck at financing and accounting. Can you please show the steps on how this is done. I and very lost. Thank you.
New Country LLC is forecasting its financial statements. Sales are expected to be $2.2billion in year 2015. The firm’s operating costs (include cost of goods sold and the other operating costs) will grow at the same pace with sales. All assets and accounts payables and accruals will grow at the same pace with sales. 40% of net income will be paid as dividend. Tax rate is 40%. Given its current financial statements below, help New Country LLC to construct its Pro Forma income statement and Pro Forma Balance Sheet.
2014 Balance Sheet (Millions of $) Cash 20 Accounts payables 70 Accounts receivable 240 Notes payables 100 Inventories 240 Accruals 30 Total CA 500 Total CL 200 Fixed assets 500 Long-term debt 100 Common stock 500 Retained Earnings 200 Total assets 1,000.00 Total liabilities and equity1,000.00
Explanation / Answer
Income Statements (Millions of $) Proforma 2014 2015 Sales 2,000.00 2200.00 Cost of Goods Sold 1,000.00 1100.00 (50% of sales) Other Operating Costs 900.00 990.00 (45% of sales) EBIT 100.00 110.00 Interest 10.00 10.00 EBT 90.00 100.00 Taxes(40%) 36.00 40.00 Net Income 54.00 60.00 Dividends 21.60 24.00 (40% of NI) Add. to Retained Earnings 32.40 36.00 Balance Sheet (Millions of $) Proforma Proforma 2014 2015 2014 2015 Cash 20.00 22 Accounts payable 70.00 77.00 10% increase Accounts receivable 240.00 264 Notes payable 100.00 154.00 Balancing figure-Required external financing = 154 -100 = 54.00 Inventories 240.00 264 Accruals 30.00 33.00 10% increase Total CA 500.00 550 Total CL 200.00 264.00 Fixed assets 500.00 550 Long-term debt 100.00 100.00 Common stock 500.00 500.00 Retained Earnings 200.00 236.00 200+RE 36 Total assets 1000.00 1,100.00 Total liabilities and equity 1,000.00 1100.00 All assets increased by 10% (same increase as sales)
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