"> (Answered) Chapter 18, Question 1- The following is the financial statement of Executive Fruit Company for the year ended December 2014. - Tutorials Prime

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(Answered) Chapter 18, Question 1- The following is the financial statement of Executive Fruit Company for the year ended December 2014.


Chapter 18, Question 1- The following is the financial statement of Executive Fruit Company for the year ended December 2014.


Chapter 18, Question 1- The following is the financial statement of Executive Fruit Company for the year ended December 2014.   INCOME STATEMENT, 2014 (Figures in $ Thousands)   Revenue $ 3,500     Cost of goods sold   3,150         EBIT $ 350     Interest   70         Earnings before taxes $ 280     State and federal tax   112         Net income $ 168     Dividends   112         Additions to retained earnings $ 56         BALANCE SHEET (Year-End, 2014) (Figures in $ Thousands)   Assets            Net working capital $ 350        Fixed assets   1,400            Total assets $ 1,750         Liabilities and shareholders' equity            Long-term debt $ 700        Shareholders' equity   1,050            Total liabilities and shareholders' equity $ 1,750         The following are the first stage and second stage pro forma financial statements of Executive Fruit Company for the year ended December 2015.   First stage pro forma statements:   PRO FORMA INCOME STATEMENT, 2015 (Figures in $ Thousands)   Revenue $ 3,850     Cost of goods sold   3,465         EBIT $ 385     Interest   70         Earnings before taxes $ 315     State and federal tax   126         Net income $ 189     Dividends   126         Additions to retained earnings $ 63         PRO FORMA BALANCE SHEET (Year-End, 2015) (Figures in $ Thousands)   Assets            Net working capital $ 385        Fixed assets   1,540            Total assets $ 1,925         Liabilities and shareholders' equity            Long-term debt $ 700        Shareholders' equity   1,113            Total liabilities and shareholders' equity $ 1,813               Required external financing $ 112         Second stage pro forma balance sheet:   PRO FORMA BALANCE SHEET (Year-End, 2015) (Figures in $ Thousands)   Assets            Net working capital $ 385        Fixed assets   1,540            Total assets $ 1,925         Liabilities and shareholders' equity            Long-term debt $ 812        Shareholders' equity   1,113            Total liabilities and shareholders' equity $ 1,925         How would Executive Fruit’s financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.)     Dividends fall by $ . Therefore, the requirement for external financing falls from $ to $ . On the other hand, shareholders' equity will be increased by $ .     The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.):         Long-term debt $     Shareholders' equity       Total $      Chapter 18, Question 3- Executive Fruit’s financial manager believes that sales in 2015 could rise by as much as 20% or by as little as 5%. Assets and costs change in proportion to sales, debt remains constant, and no new equity financing occurs.     a. Recalculate the first-stage pro forma financial statements under these two growth assumptions and calculate the required external financing (All figures are in thousands). (Enter your answers in thousands.)     Base Case      20% Growth        5% Growth INCOME STATEMENT               Revenue $ 12,000   $     $     Cost of goods sold   10,800                 EBIT $ 1,200   $     $     Interest   240                 Earnings before taxes $ 960   $     $     State and federal tax   384                 Net income $ 576   $     $     Dividends   384                 Retained earnings $ 192   $     $                       BALANCE SHEET               Assets                  Net working capital $ 1,200   $     $        Fixed assets   4,800                    Total assets $ 6,000   $     $           Liabilities and shareholders' equity                  Long-term debt $ 2,400   $     $        Shareholders' equity   3,600                    Total liabilities and shareholders' equity $ 6,000   $     $           Required external financing       $     $     b. Assume any required external funds will be raised by issuing long-term debt and that any surplus funds will be used to retire such debt. Prepare the completed (second-stage) pro forma balance sheet. (Enter your answers in thousands.)   BALANCE SHEET   Base Case 20% Growth      5% Growth      Assets                  Net working capital $ 1,200   $     $        Fixed assets   4,800                    Total assets $ 6,000   $     $           Liabilities and shareholders' equity                  Long-term debt $ 2,400   $     $        Shareholders' equity   3,600                    Total liabilities and shareholders' equity $ 6,000   $     $     Please see attachment with two questions.  Chapter 18, Question 1- The following is the financial statement of Executive Fruit Company for the year ended

 

December 2014.

 

INCOME STATEMENT, 2014

 

(Figures in $ Thousands)

 

Revenue

 

$

 

3,500

 

Cost of

 

goods sold

 

3,150

 

EBIT

 

$

 

350

 

Interest

 

70

 

Earnings

 

before

 

taxes

 

$

 

280

 

State and

 

federal tax

 

112

 

Net

 

income

 

$

 

168

 

Dividend

 

s

 

112

 

Additions

 

to retained

 

earnings

 

$

 

56

 

BALANCE SHEET (Year-End, 2014)

 

(Figures in $ Thousands)

 

Assets

 

Net working capital

 

$

 

350

 

Fixed assets

 

1,400

 

Total assets

 

$

 

1,750

 

Liabilities and

 

shareholders' equity

 

Long-term debt

 

$

 

700

 

Shareholders' equity

 

1,050

 

Total liabilities and

 

shareholders' equity

 

$

 

1,750

 

The following are the first stage and second stage pro forma financial statements of Executive Fruit Company for

 


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