Assume now that equity accounts do not vary directly with sales but change when retained earnings change
Question:
Assume now that equity accounts do not vary directly with sales but change when retained earnings change or new equity is issued. The company pays 85 per cent of its profit as dividends every year. In addition, the company plans to expand production capacity by acquiring additional equipment. This will cost the company $12 million. The company has no plans to issue new equity this year. Prepare a pro forma balance sheet using this information. Any funds that need to be raised (in addition to changes in current liabilities) will be in the form of long-term debt.
Based on the information in part (b), calculate: i. the External Financing Needed ii. the Internal Growth Rate iii. the Sustainable Growth Rate
balance sheet | ||||||
assests | liability | |||||
cash | 4186548 | account payable | 11302098 | |||
account receivable | 7288442 | bank overdraf | 6071870 | |||
inventories | 27834593 | total current liability | 17373968 | |||
total current assets | 39309583 | 10 year corporate bond | 37164258 | |||
equipment | 54203102 | ordinary shares | 24984375 | |||
buildings | 1530293 | retained earning | 16176217 | |||
intangible assets | 655840 | total liability and equity | 95698818 | |||
total assets | 95698818 | |||||
income statement | ||||||
revenues | 241515625 | |||||
costs | 181582031 | |||||
EBITDA | 59933594 | |||||
Depreciation | 29148438 | |||||
EBIT | 30785156 | |||||
interest | 14919836 | |||||
EBT | 15865320 | |||||
Tax 30% | 4759596 | |||||
Profit | 11105724 | |||||
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach