Principles of Managerial Finance, Student Value Edition Plus MyLab Finance with Pearson eText - Access Card Package (15th Edition) (Pearson Series in Finance)
15th Edition
ISBN: 9780134830209
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 4, Problem 4.3STP
a)
Summary Introduction
To calculate: Pro forma income statement using percent of sales method.
b)
Summary Introduction
To calculate: Underestimation in Percent of sales method.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Learning Objective 7: Calculate return on assets) In 2018, Ambrosia Corporation LO 7reported $100 million in sales, $18 million in net income, and average total assets of $200 million.What is Ambrosia’s return on assets in 2018?
(Learning Objective 7: Calculate return on assets) Handley Grocery Corporationreported the following information in its comparative financial statements for the fiscal yearended January 31, 2018:January 31,2018January 31,2017Net sales....................................Net earnings..............................Average total assets...................$50,000$ 2,200$40,000$48,350$ 2,100$39,300Requirements1. Compute the net profit margin ratio for the years ended January 31, 2018, and 2017. Did itimprove or worsen in 2018?2. Compute asset turnover for the years ended January 31, 2018, and 2017. Did it improve orworsen in 2018?3. Compute return on assets for the years ended January 31, 2018, and 2017. Did it improveor worsen in 2018? Which component—net profit margin ratio or asset turnover—wasmostly responsible for the change in the company’s return on assets?
(Learning Objective 5: Differentiate financing with debt vs. equity) OrchardMedical Goods is embarking on a massive expansion. Assume the plans call for opening20 new stores during the next two years. Each store is scheduled to be 30% larger than thecompany’s existing locations, offering more items of inventory and with more elaborate displays. Management estimates that company operations will provide $1.0 million of the cashneeded for expansion. Orchard Medical must raise the remaining $4.75 million from outsiders.The board of directors is considering obtaining the $4.75 million either by borrowing at 4%or by issuing an additional 200,000 shares of common stock. This year the company has earned$5 million before interest and taxes and has 200,000 shares of $1-par common stock outstanding. The market price of the company’s stock is $23.75 per share. Assume that income beforeinterest and taxes is expected to grow by 30% each year for the next two years. The company’smarginal income tax…
Chapter 4 Solutions
Principles of Managerial Finance, Student Value Edition Plus MyLab Finance with Pearson eText - Access Card Package (15th Edition) (Pearson Series in Finance)
Ch. 4.1 - Prob. 4.1RQCh. 4.1 - Prob. 4.2RQCh. 4.2 - Briefly describe the first four modified...Ch. 4.2 - Describe the overall cash flow through the firm in...Ch. 4.2 - Prob. 4.5RQCh. 4.2 - 4-B Why is depreciation (as well as amortization...Ch. 4.2 - Prob. 4.7RQCh. 4.2 - Prob. 4.8RQCh. 4.2 - Prob. 4.9RQCh. 4.3 - Prob. 4.10RQ
Ch. 4.3 - Prob. 4.11RQCh. 4.3 - Prob. 4.12RQCh. 4.3 - What is the cause of uncertainty in the cash...Ch. 4.4 - Prob. 4.14RQCh. 4.5 - Prob. 4.15RQCh. 4.5 - Prob. 4.16RQCh. 4.6 - Prob. 4.17RQCh. 4.6 - What is the significance of the plug figure,...Ch. 4.7 - Prob. 4.19RQCh. 4.7 - Prob. 4.20RQCh. 4 - Opener-in-Review The chapter opener described a...Ch. 4 - Learning Goals 2, 3 ST4-1 Depreciation and cash...Ch. 4 - Prob. 4.2STPCh. 4 - Prob. 4.3STPCh. 4 - Prob. 4.1WUECh. 4 - Prob. 4.2WUECh. 4 - Learning Goal 3 E4-3 Determine the operating cash...Ch. 4 - Prob. 4.4WUECh. 4 - Learning Goal 5 E4-5 Rimier Corp. forecasts sales...Ch. 4 - Prob. 4.1PCh. 4 - Learning Goal 2 P4-2 Depreciation In early 2019,...Ch. 4 - Prob. 4.3PCh. 4 - Learning Goals 2, 3 P4-4 Depreciation and...Ch. 4 - Learning Goal 3 P4-5 Classifying inflows and...Ch. 4 - Prob. 4.6PCh. 4 - Learning Goal 4 P4-8 Cash receipts A firm has...Ch. 4 - Learning Goal 4 P4-9 Cash disbursements schedule...Ch. 4 - Learning Goal 4 P4-10 Cash budget: Basic Grenoble...Ch. 4 - Prob. 4.11PCh. 4 - Learning Goal 4 P4-12 Cash budget: Advanced The...Ch. 4 - Prob. 4.13PCh. 4 - Prob. 4.14PCh. 4 - Learning Goal 4 P4-15 Multiple cash budgets:...Ch. 4 - Learning Goal 5 P4-16 Pro forma income statement...Ch. 4 - Learning Goal 5 P4-17 Pro forma income statement:...Ch. 4 - Learning Goal 5 P4-18 Pro forma balance sheet:...Ch. 4 - Learning Goal 5 P4-19 Pro forma balance sheet...Ch. 4 - Learning Goal 5 P4-20 Integrative: Pro forma...Ch. 4 - Learning Goal 5 P4-21 Integrative: Pro forma...Ch. 4 - Prob. 4.22PCh. 4 - Prob. 1SE
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- (Learning Objective 7: Calculate return on assets) Hometown Supply Companyreported the following information in its comparative financial statements for the fiscal yearended January 31, 2018:January 31,2018January 31,2017Net sales....................................Net earnings..............................Average total assets...................$84,000$ 4,200$70,000$82,600$ 4,050$69,450Requirements1. Compute the net profit margin ratio for the years ended January 31, 2018, and 2017. Did itimprove or worsen in 2018?2. Compute asset turnover for the years ended January 31, 2018, and 2017. Did it improve orworsen in 2018?3. Compute return on assets for the years ended January 31, 2018, and 2017. Did it improveor worsen in 2018? Which component—net profit margin ratio or asset turnover—wasmostly responsible for the change in the company’s return on assets?arrow_forwardSelf-Supporting Growth Rate Maggie's Muffins Bakery generated $2 million in sales during 2019, and its year-end total assets were $1.2 million. Also, at year-end 2019, current liabilities were $1 million, consisting of $300,000 of notes payable, $500,000 of accounts payable, and $200,000 of accruals. Looking ahead to 2020, the company estimates that its assets must increase at the same rate as sales, its spontaneous liabilities will increase at the same rate as sales, its profit margin will be 7%, and its payout ratio will be 50%. How large a sales increase can the company achieve without having to raise funds externally—that is, what is its self-supporting growth rate? Do not round intermediate calculations. Enter your answer for sales increase in dollars. For example, an answer of $2 million should be entered as 2,000,000.Round the monetary value to the nearest dollar and percentage value to one decimal place. Sales can increase by $ , that is by %arrow_forwardHello, Please answer all question and show work. Thanks :) The following tables summarizes the 2019 income statement and end-year balance sheet of Drake’s Bowling Alleys. Drake’s financial manager forecasts a 10% increase in sales and costs in 2020. The ratio of sales to average assets is expected to remain at 0.40. Interest is forecasted at 5% of debt at the start of the year. Income Statement, 2019 (Figures in $ thousands) Sales: $1,600 (40% of average assets)a Costs: $1,200 (75% of sales) Interest: $32 (5% of debt at start of year)b Pretax Profit: $368 Tax: 147 )40% of pretax profit) Net Income: $220 a Assets at the end of 2018 were $3,900,000. b Debt at the end of 2018 was $650,000. Balance Sheet, Year-End (Figures in $ thousands) Assets: $4,100 Debt: $650 Equity: $3,450 Total: $4,100 $4,100 a. What is the implied level of assets at the end of 2020? (Do not round your intermediate…arrow_forward
Recommended textbooks for you
Financial Projections for Startups Basic Walkthrough; Author: Mike Lingle;https://www.youtube.com/watch?v=7avegQF4dxI;License: Standard youtube license