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In: Finance

Financial information on AAA Ltd. is shown below. AAA Ltd. Income Statement For the Year Ended...

Financial information on AAA Ltd. is shown below.

AAA Ltd. Income Statement

For the Year Ended December 31st,

2019

2018

Sales

5,375,250

4,025,350

Cost Of Goods Sold

2,835,450

2,105,837

Other Expenses

1,100,500

1,058,600

Depreciation

75,500

67,800

Earnings Before Interest and Taxes

1,363,800

793,113

Interest Expense

84,350

68,925

Earnings Before Taxes

1,279,450

724,188

Taxes (30%)

383,835

217,256

Net Income

$ 895,615

$ 506,932

AAA Ltd. Balance Sheet

As at December 31st,

ASSETS

2019

2018

      Cash & Equivalent

67,250

53,925

      Short-term investments

225,783

192,243

      Inventories

1,522,500

1,407,530

      Accounts Receivable

303,200

221,058

Total Current Assets

2,118,733

1,874,756

      Prop, Plant & Equip - Net

2,582,989

2,002,958

Total Assets

$ 4,701,672

$ 3,877,714

LIABILITIES & EQUITY

      Accounts Payable

392,952

275,929

      Notes Payable

101,982

89,203

      Accruals

76,205

57,292

      Short-term Debt

325,029

317,416

Total Current Liabilities

896,168

739,840

      Long-Term Debt

1,054,024

873,204

Total Liabilities

1,950,192

1,613,044

      Common Share Capital

650,000

650,000

      Retained Earnings

2,101,480

1,614,670

Total Equity

2,751,480

2,264,670

Total Liabilities and Equity

$ 4,701,672

$ 3,877,714

Sales are forecast to increase by 20% in 2020.

Notes Payable, Short-term Debt, Long-term Debt, and Common Share Capital will not change. Net Plant and Equipment is forecasted to be $2,900,000 next year. Short-term investments are expected to be $240,000.

In 2020, the company’s dividend payout ratio will be 40%.

In 2020, cost of goods sold is expected to be 52% of sales. Other expenses will be 23% of sales. Depreciation expense in 2020 is expected to be $90,000.

Cash is expected to be 2% of sales, and inventories will be 30% of sales. Accounts receivable will be 6% of sales. Accounts payable will be 5% of sales. Accruals will be 1% of sales.

The company is expected to pay 4% per year compounded annually on its short-term debt and 6% per year compounded annually on its long-term debt. The interest expense on the short-term debt in 2020 is calculated as: [interest rate on short-term debt * amount of short-term debt outstanding at the end of 2019]. The interest expense on the long-term debt is calculated as: [interest rate on long-term debt * amount of long-term debt outstanding at the end of 2019].

The company’s tax rate is 30%.

Based on the information provided you are to:

  1. Complete the pro-forma income statement and balance sheet for 2020.
  2. Calculate the amount of Additional Funds Needed in 2020.

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