Using the financial information: Proforma Income Statement, Balance Sheet, Statement of Cash Flows, and Key Ratios. Solve
Question:
Using the financial information: Proforma Income Statement, Balance Sheet, Statement of Cash Flows, and Key Ratios. Solve these scenarios and how the financial information will change when the following scenario:
a. The Banker of Pipes is only willing to loan the company up to $500K for the years 2017, 2018, and 2019.
No other debt financing is available from any financial institution.
b. You must pull together a set of Proforma statements with the above loan constraints. Additional
constraints:
i. Cash must remain constant at $45K
ii. Prepaid Expenses must remain constant at $28K
iii. Accounts Receivable Days cannot be less than 30 Days
iv. Inventory Days cannot be less than 85 Days
v. Plant, Property and Equipment must grow at least 5% in 2017 and at least 10% in the next two
years
vi. You must keep ROE (Return on Equity) at 30% or higher for all proforma years
vii. As indicated above, the Bank loan is frozen at $500K (you can’t increase Long-term debt and
must pay back $10K per year as stated in the base plan)
viii. You must meet or beat “base proforma” income for all 3 years
c. What are the implications of the plan you have pulled together to meet the above constraints – Please
explain in detail?
d. Write Summarize your findings from the “What if” scenario in a one-page executive summary.
Using Financial Accounting Information The Alternative to Debits and Credits
ISBN: 978-1133161646
7th Edition
Authors: Gary A. Porter, Curtis L. Norton