Now estimate the 2010 financial requirements using the forecasted I financial statement approach. Assume
(1) That each type of asset, as well as payables, accruals, and fixed and variable costs, will be the same percentage of sales in 2010 as in 2009;
(2) That the payout ratio is held constant at 40%;
(3) That external funds needed are financed 50% by notes payable and 50% by long-term debt (no new common stock will be issued);
(4) That all debt carries an interest rate of 10%
(5) That interest expenses should be based on the balance of debt at the beginning of the year.
Betty Simmons, the new financial manager of Southeast Chemicals (SFC), a Georgia producer of specialized chemicals for use in fruit orchards, must prepare a financial forecast for 2010. SEC€™s 2009 sales were $2 billion, and the marketing department is forecasting a 25% increase for 2010.
A. 2009 Balance sheet (Millions of Dollars)

B. 2009 Income Statement (Millions of Dollars)

C. KeyRatios

Percent et Sales oe Sales Cash and secures 5 20) Accounts aable atd acerls Nutis paryahle 5% 12% oal rey Rahties Lons m de Common ock Ritained eanting 740 500 5 200 100 Net fed asiets 25% eil asets 51.00 Tual iblties and etquity 2.304 B. 2009 Income Statement (Millions of Dollars) Percent of Sales Sales Cost of goods sold (COGS Sales, general, and administrative costs SGA $2,000.00 1.200.00 60%, 35% Eanings before interest and taxes Interest Famings hefore taxes Taxes 140%, Net income Dividends (40%) Addtion to retained eamings $ 100.00 1000 $ 9000 36.00 S 540o 21.60 S 32.40 C. Key Ratios SEC Industry 4.00 2.70% 7,71% Profit margin Return on equity Days sales outstanding 365 days Inventory turnover Fixed assets turnover Debt/assets Times interest earned Current ratio Rotarn n investnd eapital NOPAT/Operating capital, 15.60% 43.80 days 32.00 days 8.33 4,00 30.00% 10.00 2.50 11.00 5.00 36.00% 9.40 3.00 14.00 67%