Question

Dahlia Colby, CFO of Charming Florist Ltd., has created the firm’s pro forma balance sheet for the next fiscal year. Sales are projected to grow by 20 percent to $450 million. Current assets, fixed assets, and short-term debt are 15 percent, 70 percent, and 5 percent of sales, respectively. Charming Florist pays out 20 percent of its net income in dividends. The company currently has $133 million of long-term debt and $61 million in common stock par value. The profit margin is 16 percent.

  

a.

Prepare the current balance sheet for the firm using the projected sales figure. (Be sure to list the assets and liabilities in order of their liquidity. Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)

  

Balance Sheet
Assets			Liabilities and equity
(Click to select)Accounts receivableCommon stockShort-term debtFixed assetsCurrent assetsLong-term debt	$		(Click to select)Current assetsLong-term debtAccumulated retained earningsCommon stockAccounts payableShort-term debt	$
(Click to select)Common stockShort-term debtFixed assetsLong-term debtCurrent assetsAccounts receivable			(Click to select)Short-term debtCurrent assetsLong-term debtAccumulated retained earningsAccounts payableCommon stock
			(Click to select)Accumulated retained earningsAccounts payableLong-term debtShort-term debtCommon stockCurrent assets	$
			(Click to select)Current assetsShort-term debtLong-term debtAccumulated retained earningsCommon stockAccounts payable
			Total equity	$
Total assets	$		Total liabilities and equity	$

  

b.

Based on Ms. Colby’s sales growth forecast, how much does Charming Florist need in external funds for the upcoming fiscal year? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

  

External financing needed

$

  

c-1.

Prepare the firm’s pro forma balance sheet for the next fiscal year. (Be sure to list the assets and liabilities in order of their liquidity. Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)

  

Balance Sheet
Assets			Liabilities and equity
(Click to select)Accumulated retained earningsLong-term debtFixed assetsShort-term debtAccounts receivableCurrent assets	$		(Click to select)Common stockShort-term debtLong-term debtAccumulated retained earningsAccounts payableCurrent assets	$
(Click to select)Accounts receivableLong-term debtAccumulated retained earningsShort-term debtCurrent assetsFixed assets			(Click to select)Accumulated retained earningsAccounts payableLong-term debtCurrent assetsCommon stockShort-term debt
			(Click to select)Short-term debtAccumulated retained earningsCommon stockLong-term debtCurrent assetsAccounts payable	$
			(Click to select)Current assetsShort-term debtLong-term debtAccumulated retained earningsAccounts payableCommon stock
			Total equity	$
Total assets	$		Total liabilities and equity	$

  

c-2.	Calculate the external funds needed. (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

  

External financing needed

$

References

eBook & Resources

WorksheetDifficulty: 1 Basic

Answer 1

a)	Assets	Millions
	Current assets = (450000000/120%)*15% =	$        5,62,50,000
	Fixed assets = (450000000/120%)*70% =	$     26,25,00,000
	Total assets	$     31,87,50,000
	Liabilities & Equity
	Short term debt = (450000000/120%)*5% =	$        1,87,50,000
	Long term debt	$     13,30,00,000
	Common stock	$        6,10,00,000
	Retained earnings	$     10,60,00,000
	Total liabilities & equity	$     31,87,50,000
b)	External funds needed = [(Assets / Sales) x Δ sales] - [(Spontaneous liabilities / Sales) x Δ sales] - [(Projected sales x Profit margin) x (1-Dividend payout ratio)]
	= 85%*75000000-5%*75000000-450000000*16%*(1-20%) =	$           24,00,000
	[last year sales = 450000000/120% = 375000000], Delta sales = 450000000-375000000 = 75000000]
c-1)	Assets	Millions
	Current assets = (450000000)*15% =	$        6,75,00,000
	Fixed assets = (450000000)*70% =	$     31,50,00,000
	Total assets	$     38,25,00,000
	Liabilities & Equity
	Short term debt = (450000000)*5% =	$        2,25,00,000
	Long term debt	$     13,30,00,000
	Common stock	$        6,10,00,000
	Retained earnings (106000000+450000000*16%*80%) =	$     16,36,00,000
	Total liabilities & equity	$     38,01,00,000
c-2)	EFN = 382,500,000-380,100,000 =	$           24,00,000