XYZ Ltd had 2015 sales of Tshs 100 million. The balance sheet items that vary directly...

  

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XYZ Ltd had 2015 sales of Tshs 100 million. The balance sheet items that vary directly with sales and the profit margin are as follows: Percent Cash Accounts receivable Inventory Net fixed assets Accounts payable Accruals Profit margin after taxes 5% 15 20 40 15 10 10% The dividend payout rate is 50 percent of earnings, and the balance in retained earnings at the end of 2013 was Tshs 33 million. Notes payable are currently Tshs 7 million. Long-term bonds and common stock are constant at Ishs 5 million and Tshs 10 million, respectively. (a) (b) (C) How much additional external capital will be required for 2016 if sales increase 15 percent? (Assume that the company is already operating at full capacity). What will happen to external fund requirement if XYZ Ltd reduces the payout ratio, grows at a slower rate, or suffers a decline in its profit margin? Discuss each of these separately. Prepare a pro forma balance sheet for 2016 assuming that any external funds being acquired will be in the form of notes payable. Disregard the information in part (b) in answering this question (that is, use the original information and part (a) in constructing your pro forma balance sheets). XYZ Ltd had 2015 sales of Tshs 100 million. The balance sheet items that vary directly with sales and the profit margin are as follows: Percent Cash Accounts receivable Inventory Net fixed assets Accounts payable Accruals Profit margin after taxes 5% 15 20 40 15 10 10% The dividend payout rate is 50 percent of earnings, and the balance in retained earnings at the end of 2013 was Tshs 33 million. Notes payable are currently Tshs 7 million. Long-term bonds and common stock are constant at Ishs 5 million and Tshs 10 million, respectively. (a) (b) (C) How much additional external capital will be required for 2016 if sales increase 15 percent? (Assume that the company is already operating at full capacity). What will happen to external fund requirement if XYZ Ltd reduces the payout ratio, grows at a slower rate, or suffers a decline in its profit margin? Discuss each of these separately. Prepare a pro forma balance sheet for 2016 assuming that any external funds being acquired will be in the form of notes payable. Disregard the information in part (b) in answering this question (that is, use the original information and part (a) in constructing your pro forma balance sheets).

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Increase in Sales 015 100 million 15 million Current assets 5 15 20 40 80 Current liabilities 15 10 ... View the full answer