Question

Given the financial statements below for Dragonfly Enterprises, what is the external financing need for a pro forma increase in sales of 12% 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

Ans.                                                                 Income statement for the year 2011 ($ Million)

                                                                                                    $                                     

                              Sales                                             :           370

                              COGS                                            :           226

                              Selling, Gen &Admin exp.         :           62

                              Depreciation                                :           20

                              EBIT                                               :          62

                             Interest exp.                                   :         12

                             Taxable income                            :          50

                              Tax                                                  :         20

                              Net income                                   :        30

                              Dividend                                        :         9

                              Retained earning                        :        21

                                                                                       Balance sheet

        Liabilities               2010            2011 Assets    2010 2011       

Account payable 26 30                                Cash                                 10                            10

Notes payable 0 0                              Account Receivable       46    50

Long term debt                      140               150                                 Inventory                          43                            45

Common stock                      22                  22                                  Fixed Assets                  166                          195

Retained earning 77    98   

                                                265                300                                                                          265                          300

  

                                                                  Cash flow statement

cash flow from operating Activities                                    $                          $

Earning after tax                                              :                   30.00

Depreciation                                                    :                   20.00

Change working capital

Increase account receivable(46-50)           :                   (4)

Increase inventory (43-45)                            :                   (2)

Increase account payable (30-26)              :                   4   

Income from operating activities                 :                  48.00

Cash flow from investment activities

Fixed assets (195+20-166)                         :                                           (49.00)

Cash flow from Finance activities

Long term debt (150-140)                            : 10

dividend :    (9) 1

Net cash flow : 0

Cash statement

Opening balance                      : 10

cash flow during the year     :    0

closing balance of cash flow :    10

Income statement if sales increase by 15% ($ Million)

                                                                                                    $                                     

                              Sales                                             :           425.50

                              COGS                                            :           259.60

                              Selling, Gen &Admin exp.         :           62.00

                              Depreciation                                :           20.00

                              EBIT                                               :          83.60

                             Interest exp.                                   :         12.00

                             Taxable income                            :          71.60

                              Tax                                                  :         28.64

                              Net income                                   :        42.96

                              Dividend                                        :         9.00

                              Retained earning                        :         33.96

net cash flow will increase after sales increase by 15%

Retained earning        = 33.96

+ dep.                            =   20.00

cash flow                      = 53.96