Question

In: Finance

Current Income Statement                                      &nb

Current Income Statement                                                        Current Balance Sheet

Net sales                                   $6,500             Cash                 $   900         Accounts payable $1,020  

Less: Cost of goods sold              4,922             Accounts rec.           620         Long-term debt       4,360  

Less: Depreciation                         570             Inventory            2,850         Common stock         2,400   

Earnings before interest and taxes 1,008             Total                $4,370         Retained earnings 1,190   

Less: Interest paid                          300             Net fixed assets   4,600        

Taxable Income                        $   708             Total assets       $8,970         Total liab. & equity            $8,970

Less: Taxes                                    248                                                                                              

Net income                               $   460

               Dividends      $184     Add to RE =

________ 6.        What is the retention or plowback ratio for this company?

                            

________ 7.        Assume that the firm is operating at 85 percent of capacity. What is the full-capacity level of

                             sales?

WE WILL NOT COVER THIS IS THE FALL 2014 CLASS

                            

________ 8.        Assume the firm has a constant dividend payout ratio and a projected sales increase of 10 percent. All

                             costs, assets, and current liabilities vary directly with sales. What is the external financing need?

                            

________ 9.        What is the Equity Multiplier?

________ 10.     Assume the firm has a constant dividend payout ratio and a constant debt-equity ratio. What is the fastest the company can grow assuming they do not want any external financing?

                            

Solutions

Expert Solution

6) Plowback ratio or retention ratio shows how much earnings are retained after giving out dividends.

Plowback ratio = (Net Income - Dividends) / Net Income

= (460 - 184) / 460

= 0.6 or 60%

7) Net sale = $6,500

The current capacity is 85%

Then sales at 100% = (6,500/ 85) x 100

= $7,647

That means when the firm is operating at full capacity (that is 100%) the sales would be $7,647.

8) First we have to find the dividend pay out ratio of the firm

= (Dividend / Net Income) x 100

=(184 / 460) x 100

= 40%

Tax rate = (248 / 708) x 100

= 35%

External Financing needed = 335

9) Equity Multiplier is a financial ratio used to find the financial leverage of a firm. It shows how much reliance firm is put on external financing in order to supply its required cash flows. It shows how much risk a investor would take per dollar.

Formula:-

Equity Multiplier = Total Assets / Total Stockholder's Equity

= 8970 / (2400+1190)

= 2.5

Total Stockholder's Equity consists of Common stock and Retained Earnings.

jeff jeffy answered 2 months ago
Next > < Previous

Related Solutions

40.) Income Statement for Xenon Manufacturing:                                   &nb
40.) Income Statement for Xenon Manufacturing:                                                              2008         2009 Total sales                                          202           212 Cost of sales                                    -148          -172 Gross Profit                                         54              40 Selling, general, and administrative expenses       -22            -20 Research and development             -8               -7 Depreciation and amortization      -4              -3 Other income                                        4                6 Earnings before interest and taxes (EBIT)                                24              16        Interest income (expense)               -7              -4 Pretax income                                     14              12 Taxes                                                       -4               -3 Net Income                                          10                9 Consider the above Income Statement for Xenon Manufacturing. All values are in millions of dollars. If Xenon Manufacturing has 20 million shares outstanding, what is its EPS in 2008? a. $0.50 b. $0.25 c. $0.40 d. $0.60 50.)...
Income Statement For the Year Ended December 31, 2018 Sales                                &nb
Income Statement For the Year Ended December 31, 2018 Sales                                                               $8,500,000 Manufacturing Expenses Variable                                $3,250,000 Fixed overhead                       640,000       3,890,000 Gross Margin                                                  $4,610,000 Selling and administrative expenses Commissions                           $580,000 Fixed marketing expenses       300,000 Fixed admin expenses               450,000      1,330,000 Net Operating Income                                     $3,280,000 Fixed Interest expenses                                       230,000     Income before Taxes                                      $3,050,000      Income Taxes (21%)                                            640,500 Net Income                                                     $2,409,500 Your company is considering out-sourcing the sales and marketing to an agency specializing in these types of sales....
Income Statement For the Year Ended December 31, 2018 Sales                                &nb
Income Statement For the Year Ended December 31, 2018 Sales                                                               $8,500,000 Manufacturing Expenses Variable                                $3,250,000 Fixed overhead                       640,000       3,890,000 Gross Margin                                                  $4,610,000 Selling and administrative expenses Commissions                           $580,000 Fixed marketing expenses       300,000 Fixed admin expenses               450,000      1,330,000 Net Operating Income                                     $3,280,000 Fixed Interest expenses                                       230,000     Income before Taxes                                      $3,050,000      Income Taxes (21%)                                            640,500 Net Income                                                     $2,409,500 Your company is considering out-sourcing the sales and marketing to an agency specializing in these types of sales....
Blendy Company provides the following balance sheet and income statement for the year of 2018.                           &nb
Blendy Company provides the following balance sheet and income statement for the year of 2018.                                                             HARVEY COMPANY                                                           BALANCE SHEET                                                   AS OF 31 DECEMBER, 2018                        ASSETS                                                                                     “$”                  Current Assets:                 Cash in hand                                                                              100,000                 Inventory                                                                                      90,000                Debtors                                                                                        145,000              Total current assets                                                                    3, 35,000             Non-Current Assets:                         Total non-current assets                                                             2,530,000               Total Assets                                                                                  2,865,000                  LIABILITIES            Current Liabilities:          Total Current liabilities                                                                     5,22,000           Non-Current Liabilities:           Long term loan...
1. Bien Company has the following financial statements for 2018:              Income statement                 &nb
1. Bien Company has the following financial statements for 2018:              Income statement                                               balance sheet                                  Sales                 $ 36,000               Assets       $ 28,300      Debt          $   7000        Costs                   27,500                                                     Equity        21,300        Net income       $   8,500               Total          $ 28,300      Total             $28,300 The company has no dividend currently. It expects 10% sales, costs and income increase in 2019. It also predicts assets increase by 10% as well.    Create a pro forma 2019 income statement and balance...
The net income reported on the income statement of CamilloX Inc. for the current year was...
The net income reported on the income statement of CamilloX Inc. for the current year was $150,000. Depreciation recorded on equipment and building amounted to $45,000 for the year.  Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: Account End of Year Beginning of Year Cash 42,875 36,250 Trade Receivables (net) 147,500 137,500 Inventories 109,375 93,750 Prepaid Expenses 9,250 11,875 Accounts Payable 57,000 40,000 Salaries Payable 7,625 10,625 Dividends Payable...
Income Stmt info:                                     2018    &nb
Income Stmt info:                                     2018                        2019 Sales                                                          $1,000,000               $1,050,000 less Cost of Goods Sold:                           400,000                    432,000 Gross Profit                                                600,000                 618,000 Operating Expenses                                350,000                   365,750 Earnings before Interest & Taxes               250,000                 252,250 Interest exp                                             20,000                      20,400 earnings before Taxes                                230,000                    231,850 Taxes                                                       69,000                     69,555 Net Income                                              $161,000                 $162,295 Balance Sheet info:                   12/31/2018              ...
ABC Inc. Statement of Income For the period October 1, 2018 to September 30, 2019 Revenue                           &nb
ABC Inc. Statement of Income For the period October 1, 2018 to September 30, 2019 Revenue                                                                                                                       $15,800,000 Operating Expenses: Rent                                                                                                      1,350,000 Advertising expense                                                                       1,105,000 Bad Debts                                                                                             179,000 Salaries and wages                                                                         3,800,000            Interest                                                                                                3,150,000 Accounting and legal                                                                         195,000 Meals and entertainment                                                            1,300,000 Amortization                                                                                         750,000 Repairs and maintenance                                                                500,000 Automotive                                                                                        2,120,000                                                                                                                                                         Net Income from Operations                                                                             1,351,000                                                    Gain on disposal of asset                                                                                         350,000 Net income before taxes                                                                                      1,701,000   Income Taxes                                                                                   ...
The net income reported on the income statement for the current year was $121,900. Depreciation recorded...
The net income reported on the income statement for the current year was $121,900. Depreciation recorded on store equipment for the year amounted to $20,100. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $47,050 $42,820 Accounts receivable (net) 33,730 31,640 Inventories 46,060 48,170 Prepaid expenses 5,180 4,070 Accounts payable (merchandise creditors) 44,090 40,510 Wages payable 24,090 26,460 a. Prepare the “Cash...
The net income reported on the income statement for the current year was $121,600. Depreciation recorded...
The net income reported on the income statement for the current year was $121,600. Depreciation recorded on store equipment for the year amounted to $20,100. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: End of Year Beginning of Year Cash $49,490 $45,530 Accounts receivable (net) 35,480 33,650 Inventories 48,450 51,220 Prepaid expenses 5,440 4,330 Accounts payable (merchandise creditors) 46,370 43,070 Wages payable 25,340 28,140 a. Prepare the Cash...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT