Tozer Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, and ships them

Question:

Tozer Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, and ships them to its chain of retail stores. Tozer's balance sheet as of December 31, 2001, is shown here (in millions of dollars):

Sales for 2001 were $350 million, while net income for the year was $10.5 million. Tozer paid dividends of $4.2 million to common stockholders. The firm is operating at full capacity. Assume that all ratios remain constant.
a. If sales are projected to increase by $70 million, or 20 percent, during 2002, use the AFN equation to determine Tozer's projected external capital requirements.
b. Construct Tozer's pro forma balance sheet for December 31, 2002. Assume that all external capital requirements are met by bank loans and are reflected in notes payable.
c. Now calculate the following ratios, based on your projected December 31, 2002, balance sheet. Tozer's 2001 ratios and industry average ratios are shown here for comparison:

Stocks
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Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...