External Funds Needed Cheryl Colby, CFO of Charming Florist Ltd., has created th

Question

      External Funds Needed Cheryl 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 10 percent to $420 million. Current assets, fixed assets, and short-term debt are 20 percent, 75 percent, and 15 percent of sales, respectively. Charming Florist pays out 30 percent of its net income in dividends. The company currently has $120 million of long-term debt and $48 million in common stock par value. The profit margin is 9 percent.

Explanation / Answer

net income = 0.09 * 420 = 37.8

dividend = 0.3 * 37.8 = 11.34

retained earning = 37.8 - 11.34 =26.46

Current assets = 0.2* 420 = 84

fixed asset = 0.75 * 420 = 315

stock holder's equity = 26.46 + 48 = 74.46

short term debt = 0.15 * 420 = 63

long term debt = 120

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