Question

The Eagle Feather Fabric Company expects to complete the current year with the financial results given below.

Forecast next year using a modified percentage of sales method assuming no dividends are paid and no new stock is sold along with the following:

1. A 17% growth in sales and a 40% growth in net fixed assets.
2. A 15% growth in sales with a 10% growth in expenses and a 20% growth in net fixed assets. (Note that negative debt means the business will generate more cash than is currently owed.)

Enter your answers in thousands. For example, an answer of $12 thousands should be entered as 12, not 12,000. Round your answer to the nearest thousand. Enter all amounts as a positive number.

INCOME STATEMENT ($000)
		Current Year		Next Year
				a.		b.
	Revenue	$36,100		$		$
	COGS	14,440
	Gross Margin	$21,660		$		$
	Expenses	12,635
	EBIT	$9,025		$		$
	Interest (11%)	625
	EBT	$8,400		$		$
	Tax (42%)	3,528
	Net Income	$4,872		$		$
BALANCE SHEET ($000)
Assets
	Cash	$1,000		$		$
	Accounts receivable	5,000
	Inventory	2,888
	Current assets	$8,888		$		$
	Net fixed assets	7,250
	Total Assets	$16,138		$		$
Liabilities & equity
	Accounts payable	$1,550		$		$
	Accruals	530
	Current liabilities	$2,080		$		$
	Debt	5,598
	Equity	8,460
	Total L&E	$16,138		$		$

Answer 1

Particulars	CY	A	B
Revenue	36100	42,237	41515
COGS	14440	16,894.80	16,606.00
COGS %	40.00%	40.00%	40.00%
Expenses	12635	14,782.95	15,983.28
Expenses %	35.00%	35.00%	38.50%
EBIT	9025	10,559.25	8,925.73
Interest @11%	625	615.78	615.78
EBT	8,400	9,943.47	8,309.95
Tax @42%	3528	4,176.26	3,490.18
Net Income	4,872	5,767.21	4,819.77

Balance Sheet
Particulars	CY	A	B
Cash	1,000	3,896	4,468
Accounts Receivable	5,000	5,850	5,750
Inventory	2,888	2,888	2,888
Current Assets	8,888	12,634	13,106
Net Fixed Asset	7,250	10,150	8,700
Total	16,138	22,784	21,806
Liability and Equity
Accounts Payable	1550	1,814	1,782.50
Accruals	530	530	530
Current Liability	2080	2,344	2,313
Debt	5598	6,214	6213.78
Equity	8460	14,227	13,280
Total	16138	22,784	21,806

Cash Account	A	B
Opening Balance	1,000	1,000
Add: Realisation of debtors	5,000	5,000
Add: Revenue earned thru cash	36,387	35,765
Less: Increase in fixed asset	-2,900	-1,450
Less: Repayment of old accounts payable	-1,550	-1,550
Less: Payment of cash expenses	-29,864	-30,807
Less: Payment of Tax	-4,176	-3,490
Closing Cash Balance	3,896	4,468

Explaintation: It has been assumed that Debtors Turnover ratio, Creditors Turnover ratio remain same, debt interest is not paid and assets are not depriciated. Taxes are paid in cash and cash account is considered as movement for details refer above.