5.
-2-2
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The most recent financial statements for Fleury Inc., follow. Sales for 2012 are projected to grow by 25
percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also
remain constant. Costs, other expenses, current assets, fixed assets and accounts payable increase
spontaneously with sales.
FLEURY, INC.
2011 Income Statement
Sales
$
753,000
Costs
588,000
Other expenses
24,000
Earnings before
interest and
taxes
$
Interest paid
141,000
10,000
Taxable income
$
131,000
Taxes (40%)
52,400
Net income
78,600
Dividends
$31,440
Addition to
retained
earnings
47,160
FLEURY, INC.
Balance Sheet as of December 31, 2011
Assets
Liabilities and Owners’ Equity
Current
assets
Current
liabilities
21,240
Accounts
$
payable
55,400
Accounts
receivable
33,560
Notes
payable
14,600
Inventory
70,520
Total
Cash
Total
$
$
125,320
Long-term
$
debt
70,000
101,000
Owners’
equity
Fixed assets
Net plant
and
equipment
$
$
Total assets $
210,000
335,320
Common
stock and
$
paid-in
surplus
100,000
Retained
earnings
64,320
Total
$
164,320
Total
liabilities
and
owners’
equity
$
335,320
If the firm is operating at full capacity and no new debt or equity is issued, what external financing is
needed to support the 25 percent growth rate in sales? (Do not round intermediate calculations.)
EFN
$
7.
-2-2
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Consider the following simplified financial statements for the Fire Corporation (assuming no income
taxes):
Income Statement
Balance Sheet
Sales $
29,300
Costs
22,870
Net
$
income
6,430
Assets$
22,500
Total $
Debt $
6,000
Equity
16,500
22,500
Total $
The company has predicted a sales increase of 6 percent. Assume Fire pays out half of net income in the
form of a cash dividend. Costs and assets vary with sales, but debt and equity do not.
Prepare the pro forma statements. (Round your answers to the nearest whole dollar amount.)
Pro forma income statement
Sales
$
Pro forma balance sheet
Assets
$
Costs
Net income
Debt
$
Equity
$
Total
$
Total
$
22,500
Determine the external financing needed. (Negative amount should be indicated by a minus sign.)
External financing needed $