Question 1

Your company has pretax income of $52,000 on sales of $506,000.Sales are expected to increase by 6 percent next year and the tax rate is 40 percent.What is the expected net income for next year if your firm uses the percentage of sales approach when compiling pro forma statements?

Accepted Answer

Pro forma net income = $52,000 × (1 + 0.06) × (1 - 0.40) = $33,072

Question 2

What is the operating cash flow,given the following information?

Accepted Answer

Operating cash flow = $475 + $55 = $530

Question 3

What is the financing cash flow,given the following information?

Accepted Answer

Financing cash flow = $25 - $30 - $70 = -$75

Question 4

A firm has sales of $685,000 and cost of goods sold of $435,000.The firm expects sales to increase by 6 percent next year.What is the gross profit amount expected to be next year if the firm uses the percentage of sales approach when compiling pro forma statements?

Accepted Answer

Pro forma gross profit = ($685,000 - $435,000) × (1 + 0.06) = $265,000

Question 5

A firm has current sales of $42,000.Projected sales for next year are $44,000.The percentage of sales approach is used for pro forma purposes.All balance sheet accounts,except long-term debt and common stock,change according to that approach.The expected increase in retained earnings is $2,500.What is the projected external financing need given the following current account values?

Accepted Answer

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Question 6

The Erie Bay Liner Company has sales of $2.4 million and operating expenses of $180,000.The firm uses the percentage of sales approach and estimates next year's sales at $2.5 million.What are the operating expenses expected to be next year?

Accepted Answer

Next year's operating expenses = ($180,000 / $2,400,000) × $2,500,000 = $187,500

Question 7

A firm has net income of $32,000 on sales of $190,000.Sales are expected to increase by 6 percent next year and the dividend payout ratio is 35 percent.The firm uses the percentage of sales approach when compiling pro forma statements.What amount is expected to be added to retained earnings next year?

Accepted Answer

Addition to retained earnings = $32,000 × (1 + 0.06) × (1 - 0.35) = $22,048

Question 8

What is the operating cash flow,given the following information?

Accepted Answer

Operating cash flow = $825 + $65 = $890

Question 9

Baker Jewelry,Inc.has annual sales of $5.2 million and a gross profit margin of 60 percent.The operating expenses are $489,000 and depreciation is $155,000.Interest expense is $70,000 and the tax rate is 35 percent.What is the net income?

Accepted Answer

Net income = [($5,200,000 × 0.60) - $489,000 - $155,000 - $70,000] × (1 - 0.35) = $1,563,900

Question 10

A firm has the following account balances for this year.Sales for the year are $420,000.Projected sales for next year are $441,000.The percentage of sales approach is used for pro forma purposes.All balance sheet accounts,except long-term debt and common stock,change according to that approach.The firm plans to decrease the long-term debt balance by $23,500 next year.Retained earnings is expected to increase by $5,400 next year.What is the projected external financing need?

Accepted Answer

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Question 11

A company has the following account balances.How much cash does the firm have assuming there are no other accounts?

Accepted Answer

Cash = ($98,800 + $19,100 + $34,000) - ($22,500 + $20,200 + $78,300) = $30,900

Question 12

What is the investment cash flow?

Accepted Answer

Investment cash flow = $45 - $65 = -$20

Question 13

A firm has total equity of $61,600 and total liabilities of $18,900.Current assets are $44,700 and current liabilities are $15,200.What is the value of the net fixed assets?

Accepted Answer

Net fixed assets = ($61,600 + $18,900) - $44,700 = $35,800

Question 14

For the year,Wilson Manufacturing,Inc.increased its current assets by $62,000,decreased its current liabilities by $55,000,and decreased its fixed assets by $19,000.What is the investment cash flow for the year?

Accepted Answer

Investment cash flow = $19,000

Question 15

A firm has the following account balances for this year.Sales for the year are $500,000.Projected sales for next year are $545,000.The percentage of sales approach is used for pro forma purposes.All balance sheet accounts,except long-term debt and common stock,change according to that approach.The firm plans to decrease the long-term debt balance by $5,000 next year.Retained earnings is expected to increase by $3,500 next year.What is the projected external financing need?

Accepted Answer

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Question 16

Last year,a firm had net income of $62,000 on sales of $595,000.The projected sales for next year are $654,500.Assume the firm uses the percentage of sales method for pro forma statements.What is the projected net income?

Accepted Answer

Percentage increase in sales = ($654,500 - $595,000) / $595,000 = 0.10
Pro forma net income = $62,000 × (1 + 0.10) = $68,200

Question 17

What is the financing cash flow,given the following information?

Accepted Answer

Financing cash flow = $60 - $80 - $30 = -$50

Question 18

Zonvier,Inc.has sales of $53,800,a profit margin of 10.5 percent,and a plowback ratio of 40 percent.The company has 15,000 shares of stock outstanding.The firm uses the percentage of sales method for pro forma statements and estimates next year's sales will increase by 15 percent.What is the dividend per share expected to be next year?

Accepted Answer

Pro forma dividend per share = [$53,800 × (1 + 0.15) × 0.105 × (1 - 0.40)] / 15,000 = $0.260

Question 19

A firm has $4,500 of cash,equipment worth $42,000,inventory of $16,700,$12,200 worth of patents,and $15,500 of accounts receivable.What is the value of the total current assets?

Accepted Answer

Total current assets = $4,500 + $16,700 + $15,600 = $36,700

Question 20

What is the investment cash flow,given the following information?

Accepted Answer

Investment cash flow = $40 - $60 = -$20

Quiz 17: Projecting Cash Flow and Earnings

Your company has pretax income of $52,000 on sales of $506,000.Sales are expected to increase by 6 percent next year and the tax rate is 40 percent.What is the expected net income for next year if your firm uses the percentage of sales approach when compiling pro forma statements?

What is the operating cash flow,given the following information?

What is the financing cash flow,given the following information?

A firm has sales of $685,000 and cost of goods sold of $435,000.The firm expects sales to increase by 6 percent next year.What is the gross profit amount expected to be next year if the firm uses the percentage of sales approach when compiling pro forma statements?

The Erie Bay Liner Company has sales of $2.4 million and operating expenses of $180,000.The firm uses the percentage of sales approach and estimates next year's sales at $2.5 million.What are the operating expenses expected to be next year?

What is the operating cash flow,given the following information?

Baker Jewelry,Inc.has annual sales of $5.2 million and a gross profit margin of 60 percent.The operating expenses are $489,000 and depreciation is $155,000.Interest expense is $70,000 and the tax rate is 35 percent.What is the net income?

A company has the following account balances.How much cash does the firm have assuming there are no other accounts?

What is the investment cash flow?

A firm has total equity of $61,600 and total liabilities of $18,900.Current assets are $44,700 and current liabilities are $15,200.What is the value of the net fixed assets?

For the year,Wilson Manufacturing,Inc.increased its current assets by $62,000,decreased its current liabilities by $55,000,and decreased its fixed assets by $19,000.What is the investment cash flow for the year?

Last year,a firm had net income of $62,000 on sales of $595,000.The projected sales for next year are $654,500.Assume the firm uses the percentage of sales method for pro forma statements.What is the projected net income?

What is the financing cash flow,given the following information?

A firm has $4,500 of cash,equipment worth $42,000,inventory of $16,700,$12,200 worth of patents,and $15,500 of accounts receivable.What is the value of the total current assets?

What is the investment cash flow,given the following information?