Dahlia Colby, CFO of Charming Florist Ltd., has created the firm\'s pro forma ba
ID: 2813784 • Letter: D
Question
Dahlia 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 20 percent to $420 million. Current assets, fixed assets, and short-term debt are 25 percent, 70 percent, and 15 percent of sales, respectively. Charming Florist pays out 25 percent of its net income in dividends. The company currently has $128 million of long-term debt and $56 million in common stock par value. The profit margin is 16 percent. a. Prepare the current balance sheet for the firm using the projected sales figure. (Be sure to list the assets and liabilities in order of their liquidity. Enter your answers in dollars, not millions of dollars, e.g., 1,234,567.Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Balance Sheet Assets Liabilities and equity Current assets Short-term debt Fixed assets Long-term debt Common stock Accumulated retained eamings Total equity Total assets Total liabilities and equity b. Based on Ms. Colby's sales growth forecast, how much does Charming Florist need in external funds for the upcoming fiscal year? (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g. External financing needed c-1. Prepare the firm's pro forma balance sheet for the next fiscal year. (Be sure to list the assets and liabilities in order of their liquidity. Enter your answers in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Balance Sheet Assets Liabilities and equity (Click to select) (Click to select) (Click to select) (Click to select) (Click to s (Click to select) Total equity Total assets Total liabilities and equity c-2. Calculate the external funds needed. (Enter your answer in dollars, not millions of dollars, e.g 1,234,567. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) External financing neededExplanation / Answer
Answer a Firm's Current Year Balance Sheet Balance Sheet Assets Liabilities and Equity Current assets $87,500,000 Short term debt $52,500,000 Fixed assets $245,000,000 Long term debt $128,000,000 Common stock $56,000,000 Accumulated retained earnings $96,000,000 Total Equity $152,000,000 Total assets $332,500,000 Total Liabilities and Equity $332,500,000 Current sales = Projected sales / (1+sales growth %) = $420 million / 1.20 = $350 millions Answer b The formula to calculate the External Financing needed (EFN) is as under, EFN = Increase in assets - Increase in Liabilities - Increase in Retained Earnings Increase in assets = Current year Total assets * Sales Growth rate = $332,500,000 * 20% = $66,500,000 Increase in Liabilities = Current year short term debt * Sales Growth rate = $52,500,000 * 20% = $10,500,000 Increase in retained Earnings = Current year sales × (1 + sales growth rate) × profit margin × retention rate Increase in retained Earnings = $350,000,000 x (1+0.20) x 16% x 75% = $50,400,000 EFN = $66,500,000 - $10,500,000 - $50,400,000 External Financing Needed = $56,00,000 Answer c-1 Firm's proforma Balance Sheet for next year Balance Sheet Assets Liabilities and Equity Current assets $105,000,000 Short term debt $63,000,000 Fixed assets $294,000,000 Long term debt $133,600,000 Common stock $56,000,000 Accumulated retained earnings $146,400,000 Total Equity $202,400,000 Total assets $399,000,000 Total Liabilities and Equity $399,000,000
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