The following are the first stage and second stage pro forma financial statement
ID: 2772820 • Letter: T
Question
The following are the first stage and second stage pro forma financial statements of Executive Fruit Company for the year ended December 2015.
How would Executive Fruit’s financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.)
Dividends fall by $_______ . Therefore, the requirement for external financing falls from $______ to $_______ . On the other hand, shareholders' equity will be increased by $_______ .
The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.):
The following is the financial statement of Executive Fruit Company for the year ended December 2014.Explanation / Answer
How would Executive Fruit’s financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.)
Dividend fall by = (342000 - 513000*1/3) = $ 171000
External financing falls from $ 304000 to = (304000 - 171000) =$ 133000
Shareholders equity will be increased by $ 171000
Answer
Dividends fall by $ 171000 . Therefore,the requirement for external financing falls from $ 304000 to $ 133000 . On the other hand, shareholders' equity will be increased by $ 171000 .
Note : The above figure are in dollar , there is no instruction in this bit relating to Enter your answers in thousands, So I have provided the answer in dollar , if answer is entered in thousands then it is to be done by dividing the figure with thousand.
The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.):
Long Term Debt = 1900+133 = 2033
Shareholders' equity = 3021+171 =3192
Figures in thousand
Long-term debt 2033 Shareholders' equity 3192 Total 5225Related Questions
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