Problem: The following are the balance sheet and income statements for the year that just ended:
|
Sales
|
1,400
|
|
Operating Costs
|
1,150
|
|
EBIT
|
250
|
|
Interest
|
20
|
|
EBT
|
230
|
|
Taxes (30%)
|
|
|
Net income
|
161
|
|
Dividend
|
0
|
|
Cash
|
60
|
Accounts payable
|
50
|
|
Account receivable
|
80
|
Notes payable
|
70
|
|
Inventories
|
100
|
Long-term debt
|
150
|
|
Fixed assets
|
250
|
Common stock
|
50
|
|
|
|
Retained earnings
|
170
|
|
Total assets
|
490
|
Total liabilities & equity
|
490
|
Fixed assets are being used at full capacity and can be increased only by increments of 50%. Sales for the next year are expected to increase by 30%.
Use the percent of sales method to construct a first pass pro forma income statement and balance sheet. For the second pass, assume that all the additional needed funds will come in the form of notes payable at an interest rate of 8%.