Carter Company has plants provinces. Sales last year were $100 million, and the balance sheet at year-end is similar in percent of sales to that of previous years (and this will continue in the future). All assets and current liabilities will vary directly with sales. Assume the firm is already using capital assets at full capacity. Cash Accounts receivable Inventory Current assets Capital assets Total assets Assets Cash Accounts receivable Inventory Current assets Capital Assets Total assets ****| Assets Current ratio Total debt / assets $7 13 $ The firm has an aftertax profit margin of 6 percent and a dividend payout ratio of 30 percent. a. If sales grow by 10 percent next year, determine how many dollars of new funds are needed to finance the expansion. (Do not round Intermediate calculations. Enter the answer in millions. Round the final answer to 3 decimal places.) The firm needs $ million in external funds. $ Balance Sheet (in $ millions) b. Prepare a pro forma balance sheet with any financing adjustment made to long-term debt. (Do not round Intermediate calculations. Input all answers as positive values. Be sure to list the assets and liabilities in order of their liquidity. Enter the answers in millions. Round the final answers to 2 decimal places.) Year 1 Liabilities and shareholders' Equity Accounts payable Accrued wages Accrued taxes Current liabilities Long-term debt Common stock Retained earnings $76 Total liabilities and shareholders' equity Balance Sheet ($ millions) Liabilities and Shareholders' Equity 7.7 Accounts payable Accrued wages Accrued taxes Current liabilities Long-term debt Common stock Retained earnings Total liabilities and shareholders' equity Year 2 $7 $ **---*|*|| $ c. Calculate the current ratio and total debt to assets ratio for each year. (Do not round Intermediate calculations. Round the final answers to 1 decimal places.)
Carter Company has plants provinces. Sales last year were $100 million, and the balance sheet at year-end is similar in percent of sales to that of previous years (and this will continue in the future). All assets and current liabilities will vary directly with sales. Assume the firm is already using capital assets at full capacity. Cash Accounts receivable Inventory Current assets Capital assets Total assets Assets Cash Accounts receivable Inventory Current assets Capital Assets Total assets ****| Assets Current ratio Total debt / assets $7 13 $ The firm has an aftertax profit margin of 6 percent and a dividend payout ratio of 30 percent. a. If sales grow by 10 percent next year, determine how many dollars of new funds are needed to finance the expansion. (Do not round Intermediate calculations. Enter the answer in millions. Round the final answer to 3 decimal places.) The firm needs $ million in external funds. $ Balance Sheet (in $ millions) b. Prepare a pro forma balance sheet with any financing adjustment made to long-term debt. (Do not round Intermediate calculations. Input all answers as positive values. Be sure to list the assets and liabilities in order of their liquidity. Enter the answers in millions. Round the final answers to 2 decimal places.) Year 1 Liabilities and shareholders' Equity Accounts payable Accrued wages Accrued taxes Current liabilities Long-term debt Common stock Retained earnings $76 Total liabilities and shareholders' equity Balance Sheet ($ millions) Liabilities and Shareholders' Equity 7.7 Accounts payable Accrued wages Accrued taxes Current liabilities Long-term debt Common stock Retained earnings Total liabilities and shareholders' equity Year 2 $7 $ **---*|*|| $ c. Calculate the current ratio and total debt to assets ratio for each year. (Do not round Intermediate calculations. Round the final answers to 1 decimal places.)
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
Problem 10P
Related questions
Question
Transcribed Image Text:Carter Paint Company has plants in four provinces. Sales last year were $100 million, and the balance sheet at year-end is similar in
percent of sales to that of previous years (and this will continue in the future). All assets and current liabilities will vary directly with
sales. Assume the firm is already using capital assets at full capacity.
Cash
Accounts receivable
Inventory
Current assets
Capital assets
Total assets
Assets
Cash
Accounts receivable
Inventory
Current assets
Capital Assets
Total assets
Assets
Current ratio
Total debt assets
ta
$7
13
18
38
38
$76
$
Year 1
Balance Sheet
(in $ millions)
Accounts payable
Accrued wages
Accrued taxes
X
Liabilities and shareholders' Equity
Current liabilities
Long-term debt
Common stock
Retained earnings
Total liabilities and shareholders' equity
The firm has an aftertax profit margin of 6 percent and a dividend payout ratio of 30 percent.
a. If sales grow by 10 percent next year, determine how many dollars of new funds are needed to finance the expansion. (Do not
round Intermediate calculations. Enter the answer in millions. Round the final answer to 3 decimal places.)
The firm needs $
million in external funds.
b. Prepare a pro forma balance sheet with any financing adjustment made to long-term debt. (Do not round Intermediate
calculations. Input all answers as positive values. Be sure to list the assets and liabilities in order of their liquidity. Enter the
answers in millions. Round the final answers to 2 decimal places.)
Balance Sheet
($ millions)
Liabilities and shareholders' Equity
Accounts payable
Accrued wages
Accrued taxes
7.7
Current liabilities
Long-term debt
Common stock
Retained earnings
Total liabilities and shareholders' equity
Year 2
+4
X
$
$
$7
$
---|--*|*||
$
6
5
18
10
15
c. Calculate the current ratio and total debt to assets ratio for each year. (Do not round Intermediate calculations. Round the final
answers to 1 decimal places.)
33
$76
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