Financial Forecasting. The following balance sheet shows the fiscal 2011 data fo

Question

Financial Forecasting. The following balance sheet shows the fiscal 2011 data for Smith & Smith Assoc. (In 000,000) 12/31/11 12/31/12 (forecast) Cash $ 12 Accts Rec 20 Inventory 50 Total Current Assets $82 Fixed Assets 50 Total Assets $132 Accts Payable $ 12 Notes Payable 20 Long-Term Debt 40 Total Debt $72 Common Equity 60 Total Liabilities & Equity $132 Management believes that sales will increase in the next year by 30% over the current sales level of $300 million. The profit margin is expected to be 4%, and the dividend payout will remain at 40 percent. If the firm is at full capacity, what additional funding is required for 2012? Use long term debt if additional funds are needed. Fill in the 2012 forecast column. Use the percent of sales method to forecast. a. What is AFN? b. Fill in the 12/31/12 forecast column.

Explanation / Answer

Financial Forecasting.

(In 000,000)

31/12/2011 (Given)

Cash $ 12

Accts Rec 20

Inventory 50

Total Current Assets $82

Fixed Assets 50

Total Assets $132

Accts Payable $ 12

Notes Payable 20

Long-Term Debt 40

Total Debt $72

Common Equity 60

Total Liabilities & Equity $132

Sale in 2011 $300

Net Profit = 4%of 300 = $12

Dividend paid = 40% of 12 = $4.8

Retained Earning = $7.2

Asset Turnover Ratio = 132/300*100 = 44%

Forecast for the 2012

(In 000,000)

Sale = $390

Total Asset required = 390*44% = 171.60

AFN = 171.60-132 = 39.60

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