In: Finance
Financial information on AAA Ltd. is shown below.
AAA Ltd. Income Statement |
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For the Year Ended December 31st, |
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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 |
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As at December 31st, |
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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 |
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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%.
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