: Case study on financial statement forecasting (5 Marks)

Balance Sheet	3-Feb-01	Balance Sheet	3-Feb-01
Assets		Liabilities
Cash & Equivalents	356	Accounts Payable	3,576
Accounts Receivable	1,941	Curr. LT Debt and CLOs	857
Inventory	4,248	Other Current Liabilities	1,868
Other Current Assets	759	Total Current Liabilities	6,301
		Long-Term Debt	5,634
Total Current Assets	7,304	Total Long-Term Debt	5,634
		Deferred Taxes	1,036
Property Plant & Equipment	15,759	Total Liabilities	12,971
Accum Depr. & Amort.	(4,341)	Stockholders' Equity
Property Plant & Equipment, Net	11,418	Common Stock	75
Other Long-Term Assets	768	Additional Paid in Capital	902
		Total Shareholders' Equity	6,519
Total Assets	19,490	Total Liabilities + Shareholders' Equity	19,490

Income Statement	3-Feb-01
Total Sales	36,903
Net Income	1,264
Profit Margin	3.43%
Dividend Payout Ratio	60%
Addition to Retained Earnings	40%

Financial Forecasting & Additional Funds Needed.

For this problem, use 2001 balance sheet and income statement information for Target. Using the approach discussed in class and the textbook, project Targets 2002 balance sheet using the following assumptions and also calculate AFN Using AFN formula.

1. Sales will increase by 15% over 2001.
2. Targets 2002 net profit margin will be the same as its 2001 net profit margin
3. Target is expected to pay dividends equal to 60% of projected net income in 2002.
4. Company is operating at below capacity.
5. To balance the balance sheet, 30% of additional financing needed (positive DFN) will be raised through additional Short-Term Debt, the remaining 70% will be raised through additional Long-term Debt. Excess financing (negative DFN) will be used to pay off Long-term Debt.