Following are the 2015 balance sheet and income statement for the Woods Company.

a. The firm operated at full capacity in 2015. During 2016, it expects sales to increase by 20 percent and dividends per share to increase to $1.10. Use the projected balance sheet method to determine how much outside financing is required, develop the firm’s pro forma balance sheet and income statement, and use AFN as the balancing item.
b. If the firm must maintain a current ratio of 2.3 and a debt ratio of 40 percent, how much financing, after the first pass, will be obtained using notes payable, long-term debt, and common stock?
c. Create the second-pass financial statements by incorporating financing feed-backs and using the ratios calculated in part (b). Assume that the interest rate on debt averages 10percent.

  • CreatedNovember 24, 2014
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