Question

Given the financial statements below for Dragonfly Enterprises, what is the external financing need for a pro forma increase in sales of 8% if the company is operating at full capacity? Enter your answer as the nearest whole (e.g., 123), but do not include the $ sign.

  

Dragonfly Enterprises
Income Statement ($ Million)		2011
Sales		370
Cost of Goods Sold		226
Selling, Gen & Admin Exp		62
Depreciation		20
Earnings Before Int & Tax		62
Interest Expense		12
Taxable Income		50
Taxes at 40%		20
Net Income		30
Dividends		9
Addition to Retained Earn.		21
Balance Sheets as of 12-31
Assets	2010	2011
Cash	10	10
Account Receivable	46	50
Inventory	43	45
Total Current Assets	99	105
Net Fixed Assets	166	195
Total Assets	265	300
Liabilities and Owners Equity	2010	2011
Accounts Payable	26	30
Notes Payable	0	0
Total Current Liabilities	26	30
Long-Term Debt	140	150
Common Stock	22	22
Retained Earnings	77	98
Total Liab. and Owners Eq	265	300

Answer 1

Year	2011	Basis for projections	2012
INCOME STATEMENT
Net sales	370	+8%	400
Cost of goods sold	226	61.08% of sales	244
Selling, Gen & Admn Exp	62	16.76% of sales	67
Depreciation	20	5.41% of sales	22
EBIT	62		67
Interest excpense	12		12
Taxable income	50		55
Taxes at 40%	20		22
Net income	30		33
Dividends	9		10
Addition to retained earnings	21		23
BALANCE SHEET
Cash	10	2.70% of sales	11
Receivable	50	13.51% of sales	54
Inventories	45	12.16% of sales	49
Total current assets	105		113
Net fixed assets	195	52.70% of sales	211
Total assets	300		324
Accounts payable	30	8.11% of sales	32
Notes payable	0		0
Total current liabilities	30		32
Long term debt	150		150
Common stock	22		22
Retained earnings	98	+23	121
Total liabilities and Equity	300		325
		EFN	-1
NOTE: There is no need for external financing. There is a surplus of $1.00 million