ecently reported net income of P5,000,0000. The firm has P40,000,000 total assets. Next year, Inc. is forecasting a 20% increase in sales. The firm also estimates that if sales increase by 20%, spontaneous liabilities will increase by P950,000. The retention ratio is maintained at 75%. If the sales increase, the profit margin will remain at its current level. The company is operating at full capacity. How much is the increase in retained earnings that will contribute to cover the in

ecently reported net income of P5,000,0000. The firm has P40,000,000 total assets. Next year, Inc. is forecasting a 20% increase in sales. The firm also estimates that if sales increase by 20%, spontaneous liabilities will increase by P950,000. The retention ratio is maintained at 75%. If the sales increase, the profit margin will remain at its current level. The company is operating at full capacity. How much is the increase in retained earnings that will contribute to cover the in

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 10P

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Strickler Technology is considering changes in its working capital policies to improve its cash flow cycle. Stricklers sales last year were 3,250,000 (all on credit), and its net profit margin was 7%. Its inventory turnover was 6.0 times during the year, and its DSO was 41 days. Its annual cost of goods sold was 1,800,000. The firm had fixed assets totaling 535,000. Stricklers payables deferral period is 45 days. a. Calculate Stricklers cash conversion cycle. b. Assuming Strickler holds negligible amounts of cash and marketable securities, calculate its total assets turnover and ROA. c. Suppose Stricklers managers believe the annual inventory turnover can be raised to 9 times without affecting sale or profit margins. What would Stricklers cash conversion cycle, total assets turnover, and ROA have been if the inventory turnover had been 9 for the year?
Lux Co. recently reported sales of P100 million, and net income equal to P5 million. The company has P70 million in total assets. Over the next year, the company is forecasting a 25 percent increase in sales. Since the company is at full capacity, its assets must increase in proportion to sales. The company also estimates that if sales increase 20 percent, spontaneous liabilities will increase by P2.1 million. If the company’s sales increase, its profit margin will remain at its current level. The company’s dividend payout ratio is 45 percent. Based on the AFN formula, how much additional capital must the company raise in order to support the 20 percent increase in sales?
Bulldogs Inc. recently reported net income of P5,000,0000. The firm has P40,000,000 total assets. Next year, National Inc. is forecasting a 20% increase in sales. The firm also estimates that if sales increase by 20%, spontaneous liabilities will increase by P950,000. The retention ratio is maintained at 75%. If the sales increase, the profit margin will remain at its current level. The company is operating at full capacity. How much is the increase in retained earnings that will contribute to cover the increase in asset? A. 4,500,000 B. 36,000,000 C. 750,000 D. 3,750,000
Bulldogs Inc. recently reported net income of P5,000,0000. The firm has P40,000,000 total assets. Next year, National Inc. is forecasting a 20% increase in sales. The firm also estimates that if sales increase by 20%, spontaneous liabilities will increase by P950,000. The retention ratio is maintained at 75%. If the sales increase, the profit margin will remain at its current level. The company is operating at full capacity. How much is the increase in retained earnings that will contribute to cover the increase in asset? 4,500,000 3,750,000 750,000 36,000,000
Sunny Co. recently reported sales of P100 million, and net income of P10 million. The firm has P80 million total assets. Next year, Sunny Co. is forecasting a 35% increase in sales. The firm also estimates that if sales increase by 35%, spontaneous liabilities will increase by P5 million. The dividend payout ratio is determined to be 30%. If the sales increase, the profit margin will remain at its current level. The company is at full capacity and assets must increase in direct proportion to sales. 1) How much is the increase in retained earnings? 2) using AFN, how much additional capital must the firm raise in order to support the forecasted percent increase in sales?
Antivirus Inc. expects its sales next year to be $3,100,000. Inventory and accounts receivable will increase by $540,000 to accommodate this sales level. The company has a steady profit margin of 15 percent with a 35 percent dividend payout. How much external financing will the firm have to seek? Assume there is no increase in liabilities other than that which will occur with the external financing.
Finlay Corporation had sales this year of $3,270 million, and sales are expected to grow by 20 percent next year. Next year the company expects cost of goods sold to be 60 percent of sales, selling expenses to be $40 million per month, depreciation to be $10 million per month, and interest expense to be $24 million per month. Taxes are computed at 21 percent. What is Finlay's expected net income next year?
Dopey, Inc., a national clothing chain had sales of P 300 million last year. The business has a steady net profit margin of 8 percent and a dividend payout ratio of 25 percent. The statement of financial position for the end of last year is shown next. The company’s marketing staff has told the president that in the coming years there will be large increase in the demand for coats and slacks. A sales increase of 15 percent is forecast for the company. All statement of financial position items are expected to maintain the same percent- of-sales relationship as last year, except for common stock and retained earnings. No change is scheduled in the number of common stock shares outstanding and retained earnings will change as dictated by the profits and dividend policy pf the company. (Remember the net profit margin is 8 percent). a. Will external financing be required for the company during the coming year? b. What would be the need for external financing of the net…
The S&H construction company expects to have total sales next year totaling $15,300. In addition, the firm pays taxes at 35 percent and will owe $280,000 in interest expense. Based on last year’s operations the firm’s management predicts that its cost of goods sold will be 57 percent of sales and operating expenses will total 32 percent. What is your estimate of firm’s net income after taxes for the coming year? Complete the forma income statement below Round to the nearest dollar Pro-forma income statement Sales Cost of goods sold Gross profit Operating expenses Net operating income Interest expenses Earnings before taxes Taxes Net income
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 15 percent to $179.4 million. Current assets, fixed assets, and short-term debt are 20 percent, 90 percent, and 15 percent of sales, respectively. The company pays out 40 percent of its net income in dividends. The company currently has $27.2 million of long-term debt, and $13 million in common stock par value. The profit margin is 10 percent. Prepare the current balance sheet for the firm using the projected sales figure. Based on the sales growth forecast, how much does the company need in external funds for the upcoming fiscal year
The Glexon mill has total assets of $91,600, current liabilities of $9,700, dividends paid of $2,000, net sales of $38,400, and net income of $5,400. Assume that all costs, assets, and current liabilities change spontaneously with sales. The tax rate and dividend payout ratios remain constant. If the firm's managers project a firm growth rate of 9 percent for next year, what will be the amount of external financing needed to support this level of growth? Assume the firm is currently operating at full capacity. Select one: a. EFN=6609$ b. EFN=3.609$ c. None of the other three answers d. EFN=3609$
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 10 percent to $330 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 $121 million of long-term debt and $49 million in common stock par value. The profit margin is 9 percent. 1. Based on Ms. Colby’s sales growth forecast, how much does Charming Florist need in external funds for the upcoming fiscal year? 2. Construct the firm’s pro forma balance sheet for the next fiscal year 3. Calculate the external funds needed