Question

Consider the following simplified financial statements for the Yoo Corporation (assuming no income taxes):

Income Statement				Balance Sheet
Sales	$	46,100		Assets	$	24,300		Debt	$	6,300
Costs		39,630						Equity		18,000
Net income	$	6,470		Total	$	24,300		Total	$	24,300

The company has predicted a sales increase of 10 percent. Assume Yoo pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not.

  

Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.)

Pro forma income statement			Pro forma balance sheet
Sales	$		Assets	$		Debt	$
Costs						Equity
Net income	$		Total	$		Total	$

What is the external financing needed? (Do not round intermediate calculations. Negative amount should be indicated by a minus sign.)

External financing needed

Answer 1

Pro forma income statement			Pro forma balance sheet
Parameter	$	How it has been calculated?	Parameter	$	How it has been calculated?	Parameter	$	How it has been calculated?
Sales	50,710	46100 x (1 + 10%)	Assets	26,730	24300 x (1 + 10%)	Debt	5,172	Total - equity
Costs	43,593	39630 x (1 + 10%)	Total	26,730	Same as above	Equity	21,559	18000 + 7117 x (1 - 50%)
Net income	7,117	Sales - Costs				Total	26,730	same as total assets

Hence, external funds needed

= Projected debt balance - last years debt balance

= 5,172 - 6,300 = - $ 1,129