Question

Comparative income statements and balance sheets for Merck ($ millions) follow:


Required:
a. Use the following ratios to prepare a projected income statement, balance sheet, and statement of cash flows for Year 3.
Sales growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.27%
Gross profit margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.27%
Selling, general, and administrative expense/Sales . . . . . . . . . . . . . . . . . . . 13.69%
Depreciation expense/Prior-year property, plant, & equipment (gross) . . . . . 8.76%
Interest expense/Prior-year long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . 4.94%
Income tax expense/Pretax income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.00%
Accounts receivable turnover (Sales/Accounts receivable). . . . . . . . . . . . . . 9.15
Inventory turnover (Cost of goods sold/Inventory). . . . . . . . . . . . . . . . . . . . . 8.10
Accounts payable turnover (Cost of goods sold/Accounts payable). . . . . . . . 4.91
Taxes payable/Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50.41%
Total assets/Stockholders’ equity (financial leverage) . . . . . . . . . . . . . . . . . 2.35
Dividends per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.06
Capital expenditures/Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.04%
b. Based on your initial projections, how much external financing (long-term debt and/or stockholders’ equity) will Merck need to fund its growth at projected increases insales?


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  • CreatedJanuary 22, 2015
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