Question

Consider the following income statement for the Heir Jordan Corporation:

  

HEIR JORDAN CORPORATION Income Statement
Sales					$	43,800
Costs						34,800
Taxable income					$	9,000
Taxes (21%)						1,890
Net income					$	7,110
Dividends	$	2,518
Addition to retained earnings		4,592

  

The balance sheet for the Heir Jordan Corporation follows.

  

HEIR JORDAN CORPORATION Balance Sheet
Assets				Liabilities and Owners’ Equity
Current assets				Current liabilities
Cash	$	2,700		Accounts payable	$	2,400
Accounts receivable		3,500		Notes payable		5,400
Inventory		9,000		Total	$	7,800
Total	$	15,200		Long-term debt	$	24,000
				Owners’ equity
Fixed assets				Common stock and paid-in surplus	$	19,000
Net plant and equipment	$	38,600		Retained earnings		3,000
				Total	$	22,000
Total assets	$	53,800		Total liabilities and owners’ equity	$	53,800

  

Prepare a pro forma balance sheet, assuming an increase in sales of 13 percent, no new external debt or equity financing, and a constant payout ratio. Calculate the EFN

Answer 1

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