Comparative income statements and balance sheets for Coca-Cola are shown below ($ millions).

Required:

a. Use the following ratios to prepare a projected income statement, balance sheet, and statement of cash flows for Year 3.

Sales growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.02%
Gross profit margin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69.92%
Selling, general, and administrative expense/Sales . . . . . . . 39.28%
Depreciation expense/Prior-year PPE gross . . . . . . . . . . . . . . 12.14%
Interest expense/Prior-year long-term debt. . . . . . . . . . . . . . 5.45%
Income tax expense/Pretax income . . . . . . . . . . . . . . . . . . . . 29.88%
Accounts receivable turnover . . . . . . . . . . . . . . . . . . . . . . . . 10.68
Inventory turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.73
Accounts payable turnover . . . . . . . . . . . . . . . . . . . . . . . . . . 1.64
Taxes payable/Tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . 50.33%
Total assets/Stockholders’ equity (financial leverage). . . . . . 2.06
Dividends per share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.37
Capital expenditures/Sales . . . . . . . . . . . . . . . . . . . . . . . . . . 5.91%

b. Based on your initial projections, how much external financing (long-term debt and/or stockholders’ equity) will Coca-Cola need to fund its growth at projected increases insales?

Transcribed Image Text:

Year 2 Year1 Income Statement Net sales... Cost of goods Gross profit. Selling, general, and administrative expense.7,893 Depreciation and amortization expense Interest expense (revenue). . Income before tax Income tax expense.. . Net income $20,092 $19,889 6,204 6,044 14,048 13,685 9,221 .803 292 3,399 1,6911,222 3,969 2,177 3,481 Outstanding shares Balance Sheet Cash Receivables nventories Other current assets Total current assets $1,934 1,892 1,757 1,066 1,882 1,055 2,300 6,620 6,614 2,446 4,168 10,79310,046 $22,417 $20,834 3,679 3,905 4,816 7,105 2,652 4,453 Accumulated depreciation Total assets. Accounts payable and accrued liabilities Short-term debt and cument maturities of long-term debt Income tax liabilities 3,899 851 8,429 1,403 Total current liabilities. Deferred income taxes and other liabilities Long-term debt Total noncurrent liabilities 9,321 1,362 2,622 873 . . 3,520 2,197 870 3,196 . 20,655 18,543 13,682 13,293 9,316 $22,417 $20,834 Common stock . Retained earnings Treasury stock Shareholders' equity Total liabilities and equity. . ..