Question

QUESTION 1. Given the financial statements below for Firefly Enterprises, what is the external financing need for a pro forma increase in sales of 18%? Enter your answer as the nearest whole (e.g., 123), but do not include the $ sign.

Firefly Enterprises Income Statement ($ Million) 2011

Sales 740

Cost of Goods Sold 452

Selling, General, & Admin Exp. 124

Depreciation 40

Earnings Before Interest & Taxes 124

Interest Expense 24

Taxable Income 100

Taxes at 40% 40

Net Income 60

Dividends 18

Addition to Retained Earnings 42

Balance Sheets as of 12-31

Assets 2010 2011

Cash 20 20

Account Receivable 102 110

Inventory 76 80

Total Current Assets 198 210

Net Fixed Assets 352 410

Total Assets 550 620

Liabilities and Owners Equity

2010 2011

Accounts Payable 62 70

Notes Payable 0 0

Total Current Liabilities 62 70

Long-Term Debt 280 300

Common Stock 34 34

Retained Earnings 174 216

Total Liab. and Owners Equity 550 620

Answer 1

Firefly Enterprises Income statement ($ million)
		2011	Working	2012
Sales		740	740*1.18	873.20
Less :
Cost of Goods Sold		-452	452/740*873.20	(533.36)
Gross Profit		288		339.84
Less :
Selling, General & Admin Exp.	124		124/740*873.20	(146.32)
Depreciation	40	-164		(40.00)
Earnings Before interest and tax		124		153.52
Less : Interest		-24		(24.00)
Earnings before tax		100		129.52
Less : Tax		-40		51.81
Net Income		60		77.71
Dividends		-18	0.30	23.31
Addition to retained earnings		42		54.40
Balance Sheet	2010	2011		2012
Assets
Cash	20	20		20
Account Receivable	102	110	110/740*873.20	129.8
Inventory	76	80	80/740*873.20	94.4
Total Current assets	198	210		244.2
Net Fixed assets	352	410	410/740*873.20	483.8
Total assets	550	620		728
Liabilities and Owners Equity
Accounts Payable	62	70	70/740*843.20	79.76
Notes Payable	0	0		43.84
Total Current Liabilities	62	70		123.60
Long Term Debt	280	300		300.00
Common Stock	34	34		34.00
Retained earnings	174	216	216+54.40	270.40
Total Liabilities and Owners Equity	550	620		728.00
External fund needed = 728-684.16	43.84