$2$b$.$ Pro Forma Balance Sheet For the Pro Forma Balance Sheet $2020$: Thibodaux is at full capacity so Net fixed Assets will have to increase at the same percentage as the sales increased $($use $\backslash (\backslash \%\backslash )$ of sales$).$ The NFA should be larger for $2020!$ Look at Income Statement above for the $\backslash \%$ increase. Due to the economy, ACP increases to $66$ days and Inventory Turn$-$Over is reduced to $7\mathrm{.}0.$ Use the $\backslash \%$ of sales for all liabilities that are spontaneous $($will increase as sales increase, that is $\backslash (\backslash$overline$\{\backslash$text $\{$ AP $\}\}\backslash )$ and Accruals$).$ Look at IS above for the $\backslash \%$ increase. The desired cash balance is $\backslash (\backslash$$ $450,000\backslash ).$ Remember certain liabilities will also increase automatically $($spontaneously$)$ but some will not. Does NP $\backslash$& LTD increase because there was an increase in Sales? No$.$ A firm has to make a loan or issue more bonds. The firm has no plans at this time to borrow additional money $($maybe after Pro Forma Balance Sheet is prepared the firm will$).1.$b Rouge Horse's bank is very concerned and is considering calling in the loan. The loan agreement requires Red Horse Inc. to be at or better than the industry average for the Current, Quick, Times Interest Earned and Debt ratios. Is the bank just in its position and why? SHORT ANSWER:

YES OR NO$.$

$-$ Discuss

ROUGE HORSE Inc.

LIQUIDITY RATIOS

Current $\backslash (=\backslash )$ Current Assets$/$Current Liabilities,

Quick Test $\backslash (=(\backslash )$ Current Assets $-$ Inventory$)/$Current Liabilities

ACTIVITY RATIOS

Inventory Turnover $\backslash (=\backslash )$ Sales$/$Inventory$,$

DSO or $\backslash (\backslash$mathrm$\{$ACP$\}=\backslash$mathrm$\{$AR$\}/\backslash$mathrm$\{$S$\}/360\backslash )$

FATO$=$S$/$FA

TATO $\backslash (=\backslash )$ S$/$TA

DEBT RATIOS

Debt $\backslash (=\backslash )$ Total Liabilities$/$Total Assets,

XINT E$=$EBIT$/$INT

PROFITABILITY RATIOS

$\backslash (\backslash$mathrm$\{$PM$\}=\backslash$mathrm$\{$NI$\}/\backslash$mathrm$\{$S$\}\backslash )$

Return on Assets $\backslash (=\backslash )$ Net Income$/$Total Assets

Return on Equity $\backslash (=\backslash )$ Net Income$/$Equity