2) The 1999 Balance Sheet for ABC Corporation is shown below: Assets 1999 Liabil
ID: 2699024 • Letter: 2
Question
2) The 1999 Balance Sheet for ABC Corporation is shown below:
Assets 1999 Liabilities 1999
Cash $10,000 Accounts Payable $ 8,000
Accounts Receivable 20,000 Accruals 2,000
Inventory 40,000 Total Current Liabilities $10,000
Total Current Assets $70,000 Bonds $30,000
Net Fixed Assets $150,000 Total Liabilities $40,000
Owners Equity
Common Stock $100,000 Retained Earnings 80,000
Total Assets $220,000 Total Liab.& OE $220,000
The firm is currently operating at 100% capacity with sales of $100,000. Management believes that next year sales will increase by 10% and it is anticipating that the firms profit margin will remain at 20%. The dividend payout for next year will be 45%. In the year 2,000 what will the firms additional funds needed be? (In answering this question you must prepare a pro forma balance sheet.)
Explanation / Answer
As you can see from the above pro forma balance sheet assets are more than the liabilities. The difference is the additional funds required by the firm which can be raised through debt or equity.
Assets 1999 2000 Current Assets Cash 10000 11000 Accounts receivable 20000 22000 Inventory 40000 44000 Total current assets 70000 77000 Fixed assets Net fixed assets 150000 150000 Total Assets 220000 227000 LIABILITIES Current liabilities Accounts Payable 8000 8800 Accruals 2000 2200 Total Current liabilities 10000 11000 Bonds 30000 30000 Total liabilities 40000 41000 SHAREHOLDER'S EQUITY Common stock 100000 100000 Retained Earnings 80000 81100 Total liabilities and owners equity 220000 222100Related Questions
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