Q1) Pro Forma balance sheet--Peabody and Peabody has 2006 sales of $10million. It wants to analyze expected performance and financing needs for 2008-2 years ahead. Provided following information, respond to parts A and B.
(1) Percents of sales for items which differ directly with sales are as follows:
a. Accounts receivable, 12%
b. Inventory, 18%
c. Accounts payable, 14%
d. Net profit margin, 3%
(2) Marketable securities and other current liabilities are expected to remain unchanged.
(3) Minimum cash balance of $480,000 is desired.
(4) New machine costing $650,000 will be required in 2007, and equipment costing $850,000 will be bought in 2008. Total depreciation in 2007 is forecast as $290,000, and in 2008 $390,000 of deprecation will be taken.
(5) Accruals are expected to rise to $500,000 by end of 2008.
(6) No sale or retirement of long-term debt is expected
(7) No sale or repurchase of common stock is expected.
(8) The dividend payout of 50% of net profits is expected to continue.
(9) Sales are expected to be $11 million in 2007 and $12 million in 2008.
(10) December 31, 2008 balance sheet is listed below
Peabody & Peabody
Balance Sheet
31-Dec-06 $ in (000) |
| Assets |
|
Liabilities & Stockholders' Equity |
|
| Cash |
$400 |
Accounts payable |
$1,400 |
| Marketable securities |
$200 |
Accruals |
400 |
| Accounts receivable |
1200 |
Other Current Liabilities |
80 |
| Inventories |
1800 |
Total Current Liabilities |
$1,880 |
| Total current Assets |
$3,600 |
Long term Debt |
$2,000 |
| Net fixed assets |
4000 |
Common equity |
$3,720 |
| Total assets |
$7,600 |
Total Liabilities & stockholders' equity |
$7,600 |
A. Create pro forma balance sheet dated December 31, 2008
B. Describe the financing changes suggested by statement prepared in part A