You Are Trying to Determine How Much Money Your Company

You are trying to determine how much money your company, XYZ Corporation, will need to borrow from the bank, if any. You are in the middle of preparing the pro forma financial statements for 2005. On the next pages is the completed income statement and partially completed balance sheet for your company for 2005.

a. Using the information provided below complete the balance sheet for 2005. (Put your answers in the blank spaces on the balance sheet.)

• Inventory turnover (using end-of-year inventory) is 4.
• Your silent partners demand that 50% of net income is paid out in dividends.
• You will borrow if you have a cash shortage, and will reduce long-term debt if there is an excess of cash

b. When you have completed part a, prepare a statement of cash flows.
$\begin{array}{lr}\text { XYZ Corporation } &\text { Income Statement } \\&\text { (in millions) } \\&\text { Year ended } \\&\text { December } 31,2005\\\text { Sales } & \$ 55,484 \\\text { Cost of goods sold } & 44,176 \\\text { Selling, general \& } & 8,321 \\\text { administrative expenses } & \\\text { Total Operating Expenses } & 52,497 \\\text { Operating Income } & 2,987\\\\\text { Interest costs } & 307 \\\\\text { Income before taxes } &\underline{2.680} \\\text { Income tax expense: } & \\\text { Current } & 973\\\text {Deferred}&35\\&938\\\\\text { Net Income}&\$1,742\end{array}$