Gitman: Principl Manageri Finance_15 (15th Edition) (What's New in Finance)
15th Edition
ISBN: 9780134476315
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Textbook Question
Chapter 4, Problem 4.18P
Learning Goal 5
P4-18 Pro forma balance sheet: Basic Leonard Industries wishes to prepare a pro forma balance sheet for December 31, 2020. The firm expects 2020 sales to total $3,000,000. The following information has been gathered:
- 1. A minimum cash balance of $50,000 is desired.
- 2. Marketable securities are expected to remain unchanged.
- 3. Accounts receivable represent 10% of sales.
- 4. Inventories represent 12% of sales.
- 5. A new machine costing $90,000 will be acquired during 2020. Total
depreciation for the year will be $32,000. - 6. Accounts payable represent 14% of sales.
- 7. Accruals, other current liabilities, long-term debt, and common stock are expected to remain unchanged.
- 8. The firm’s net profit margin is 4%, and it expects to pay out $70,000 in cash dividends during 2020.
- 9. The December 31, 2019, balance sheet follows.
- a. Use the judgmental approach to prepare a pro forma balance sheet dated December 31, 2020, for Leonard Industries.
- b. How much, if any, additional financing will Leonard Industries require in 2020? Discuss.
- c. Could Leonard Industries adjust its planned 2020 dividend to avoid the situation described in part b? Explain how.
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FIN401 - Ch.12 Problems
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S24 Variant
Balance Sheet
Cash
Receivables
Inventory
Total Current Assets
Net Fixed Assets
Total Assets
Accounts Payable
Line of Credit
Accruals
Total Current Liabilities
Long-term Bonds
Common Stock
Retained Earnings
Total Liabilities & Equity
AFN (external)
Cumulative AFN
Income Statement
Final
Projection
12/31/2019
12/31/2020
160,000.00
184,000
360,000.00
387,000
720,000.00
828,000
1,240,000.00
1,399,000
4,000,000.00 4,600,000
5,240,000.00 5,999,000
360,000.00
414,000
148,954.27
200,000.00
230,000
560,000.00
792,954
1,000,000.00
1,000,000
1,100,000.00 1,248,954
2,580,000.00 2,957,091
5,240,000.00 5,999,000
0.00
297,908.55
Final
Projection
12/31/2019 12/31/2020
Sales
Operating Costs
4,000,000.00 4,600,000.00
3,200,000.00 3,680,000.00
EBIT
Interest
EBT
800,000.00 920,000.00
120,000.00 137,874.51
680,000.00 782,125.49
Taxes (25)
Net…
Assume today is 15 Jan 2020. You t e the following information regarding Salalah Ceramics
31 Dec 2019
31 Dec 2020
31 Dec 2021
31 Dec 2022
Cash Flow from 12000
Operations
Cash Investment 7600
Cash flow from operations will grow by 10% every year up to 2022 and cash investment will
grow by 20% every year up to 2022.
FCF growth after 2022 will be 5% and required return is 12%. Assuming net debt is 7000
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Striker Company estimates its expected cash receipts for the period to be $80,000 and its expected cash disbursements to
be $70,000. The beginning cash balance for the period was $5,000. The management wants to maintain a minimum cash
balance of $40,000.
Knowledge Check 01
How much cash will the company need to borrow?
O $15,000
O $25,000
O $30,000
O $40,000
Chapter 4 Solutions
Gitman: Principl Manageri Finance_15 (15th Edition) (What's New 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
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