Bahrain Company is planning to increase its sale volume next year (2021), to $ 12.2 m,...

 

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Bahrain Company is planning to increase its sale volume next year (2021), to $ 12.2 m, compared to the current year (2020), sale of $10 m. Based on the percentage of sale method of financial forecasting, you are required to prepare next year's projected balance sheet to determine amount of external fund required for implementation of the plan. Below is the 2020 balance sheet for your reference. Assume, net income is 5% of sale, dividend pay-out ratio is 40%, and only current assets, current liabilities and fixed assets will vary with sales. Assets Current assets Fixed assets Total assets Liabilities & Equity Current liabilities long term debt Total Liabilities Equity Common stock Capital surplus Retained earnings Total equity Total liability & Eq $2.m $4.m $6 m $2.m $2.5m 4.5m $0.1 $0.2 $1.2 $1.5 $6.0 Bahrain Company is planning to increase its sale volume next year (2021), to $ 12.2 m, compared to the current year (2020), sale of $10 m. Based on the percentage of sale method of financial forecasting, you are required to prepare next year's projected balance sheet to determine amount of external fund required for implementation of the plan. Below is the 2020 balance sheet for your reference. Assume, net income is 5% of sale, dividend pay-out ratio is 40%, and only current assets, current liabilities and fixed assets will vary with sales. Assets Current assets Fixed assets Total assets Liabilities & Equity Current liabilities long term debt Total Liabilities Equity Common stock Capital surplus Retained earnings Total equity Total liability & Eq $2.m $4.m $6 m $2.m $2.5m 4.5m $0.1 $0.2 $1.2 $1.5 $6.0

Answer rating: 100% (QA)

To determine the amount of external funds required for the implementation of Bahrain Companys sales increase plan we need to project the changes in current assets current liabilities and fixed assets ... View the full answer