Question 1

The following balance sheet and income statement should be used:   Hilltop, Inc. is currently operating at 89% of capacity. The profit margin and the dividend payout ratio are projected to remain constant. Sales are projected to increase by 10% next year. What is the projected addition to retained earnings for next year?

Accepted Answer

The answer of The following balance sheet and income statement...

Question 2

The Smith Co., which is currently operating at full capacity, has sales of $3,000, current assets of $800, current liabilities of $400, net fixed assets of $1,900, and a 6% profit margin. The firm has no long-term debt and does not plan on acquiring any. The firm does not pay any dividends. Sales are expected to increase by 9% next year. If all assets, liabilities, and costs vary directly with sales, how much additional equity financing is required for next year?

Accepted Answer

The answer of The Smith Co., which is currently operating...

Question 3

Assume the profit margin and the dividend payout ratio of Creative Analysis, Inc. are constant. If sales increase by 8 percent, what is the pro forma retained earnings?

Accepted Answer

The answer of    Assume the profit margin...

Question 4

Knudsen, Inc.'s firm's full-capacity sales level is $3,000,000. If the firm is currently operating at 80% of capacity, what is the current level of sales?

Accepted Answer

The current level of sales is 80% of the full-capacity sales level, which is 80% of $3,000,000. Calculating 80% of $3,000,000 gives $2,400,000.

Question 5

Given the following information, calculate sales value. Total asset turnover 0.80; total liabilities $5,000; total equity $5,000.

Accepted Answer

Total assets = Total liabilities + Total equity = $5,000 + $5,000 = $10,000. Sales = Total asset turnover × Total assets = 0.80 × $10,000 = $8,000.

Question 6

Baker's Dozen has current sales of $1,400 and a profit margin of 7 percent. The firm estimates that sales will increase by 8% next year and that all costs will vary in direct relationship to sales. What is the pro forma net income?

Accepted Answer

The current net income is calculated as 7% of $1,400, which is $98. Next year's sales are estimated to increase by 8%, making them $1,512 ($1,400 * 1.08). Since costs vary directly with sales, the profit margin remains at 7%, making the pro forma net income 7% of $1,512, which equals $105.84.

Question 7

Assuming that a company has a policy of paying out a constant fraction of net income in the form of a cash dividends, calculate the addition to retained earnings given the following information: cash dividends = $3,000; net income = $15,000.

Accepted Answer

Retained earnings are calculated as net income minus cash dividends. Given net income is $15,000 and cash dividends are $3,000, the addition to retained earnings is $15,000 - $3,000 = $12,000.

Question 8

Calculate the projected fixed assets needed given the following information: current sales = $275,000; current sales capacity = 75%; current fixed assets = $40,000; projected future sales = $475,000.

Accepted Answer

To calculate the projected fixed assets needed, first determine the current full capacity sales: $275,000 / 0.75 = $366,667. Then, find the ratio of future sales to current full capacity sales: $475,000 / $366,667 = 1.295. This means the company needs to increase its capacity by 29.5% to meet future sales. Since the current fixed assets are $40,000, the projected fixed assets needed are $40,000 * 1.295 = $51,800 (rounded to the nearest whole number gives $51,818).

Question 9

Assume Marble is projecting a 20% increase in sales for the coming year, and that assets, all costs, and current liabilities are proportional to sales. Long-term debt is not proportional to sales. Assume the firm's tax rate remains unchanged and the dividend payout is 40%. What is the external financing needed (EFN) for 2018 ($ in millions)?

Accepted Answer

The answer of   Assume Marble is projecting a...

Question 10

Consultants, Inc. is currently operating at full capacity. The profit margin and the dividend payout ratio are constant. Net working capital and fixed assets vary directly with sales. Sales are projected to increase by 5%. What is the external financing needed?

Accepted Answer

The answer of     Consultants, Inc. is...

Question 11

Calculate sales given the following data. Total fixed assets $400,000; long-term liabilities $155,000; total liabilities $280,000; total shareholders' equity $320,000; net working capital turnover 20.

Accepted Answer

Net working capital turnover = Sales / Net working capitalNet working capital = Total current assets - Total current liabilitiesTotal current assets = Total assets - Total fixed assets = $320,000 + $400,000 = $720,000Total current liabilities = Total liabilities - Long-term liabilities = $280,000 - $155,000 = $125,000Net working capital = $720,000 - $125,000 = $595,000Sales = Net working capital turnover * Net working capital = 20 * $595,000 = $1,500,000

Question 12

The following balance sheet and income statement should be used:   The profit margin, the debt-equity ratio, and the dividend payout ratio are constant. Sales are expected to increase by $4,624 next year. What is the projected addition to retained earnings for next year?

Accepted Answer

The answer of The following balance sheet and income statement...

Question 13

The following balance sheet and income statement should be used:   Hilltop, Inc. is currently operating at 75% of capacity. What is the required increase in fixed assets if sales are projected to increase by 30 percent?

Accepted Answer

The answer of The following balance sheet and income statement...

Question 14

Assume that Delalo, Inc. is operating at 80 percent of capacity. All costs and net working capital vary directly with sales. What is the amount of the pro forma net fixed assets if sales are projected to increase by 25%?

Accepted Answer

The answer of    Assume that Delalo, Inc....

Question 15

The following balance sheet and income statement should be used:   Assume that Taylor, Inc. is operating at 85% of capacity. All costs and net working capital vary directly with sales. What is the amount of total fixed assets required if sales are projected to increase by 20 percent?

Accepted Answer

The answer of The following balance sheet and income statement...

Question 16

Assume that Creative Analysis, Inc. is currently operating at 90 percent of capacity and that sales are projected to increase to $10,000. What is the projected addition to fixed assets?

Accepted Answer

The answer of    Assume that Creative Analysis,...

Question 17

Assume costs and assets increase at the same rate as sales. Also assume 40% of net income is paid out in dividends, the current debt to equity ratio is optimal, and that no new equity sales are possible. Forecast the addition to retained earnings assuming the firm's sales increase at the maximum percent possible given these assumptions.

Accepted Answer

The answer of  Assume costs and assets increase at...

Question 18

Silver's Jewelers has current sales of $138,900 and a profit margin of 8 percent. The firm estimates that sales will increase by 4% next year and that all costs will vary in direct proportion to sales. What is the pro forma net income?

Accepted Answer

To calculate the pro forma net income, first calculate the projected sales: $138,900 * 1.04 = $144,456. Then, apply the profit margin: $144,456 * 0.08 = $11,556.48.

Question 19

Calculate the external financing needed given the following information: current sales = $275,000; current sales capacity = 75%; current fixed assets = $40,000; projected future sales = $475,000.

Accepted Answer

Explanation:External financing needed = (Projected future sales / Current sales capacity) * Current fixed assets - Current fixed assets= ($475,000 / 0.75) * $40,000 - $40,000= $633,333.33 - $40,000= $11,818

Question 20

The profit margin, the debt-equity ratio, and the dividend payout ratio are constant. Sales are expected to increase by $525 next year. What is the projected addition to retained earnings for next year?

Accepted Answer

The answer of    The profit margin, the...

Quiz 4: Long-Term Financial Planning and Corporate Growth

Assume the profit margin and the dividend payout ratio of Creative Analysis, Inc. are constant. If sales increase by 8 percent, what is the pro forma retained earnings?

Knudsen, Inc.'s firm's full-capacity sales level is $3,000,000. If the firm is currently operating at 80% of capacity, what is the current level of sales?

Given the following information, calculate sales value. Total asset turnover 0.80; total liabilities $5,000; total equity $5,000.

Baker's Dozen has current sales of $1,400 and a profit margin of 7 percent. The firm estimates that sales will increase by 8% next year and that all costs will vary in direct relationship to sales. What is the pro forma net income?

Assuming that a company has a policy of paying out a constant fraction of net income in the form of a cash dividends, calculate the addition to retained earnings given the following information: cash dividends = $3,000; net income = $15,000.

Calculate the projected fixed assets needed given the following information: current sales = $275,000; current sales capacity = 75%; current fixed assets = $40,000; projected future sales = $475,000.

Consultants, Inc. is currently operating at full capacity. The profit margin and the dividend payout ratio are constant. Net working capital and fixed assets vary directly with sales. Sales are projected to increase by 5%. What is the external financing needed?

Calculate sales given the following data. Total fixed assets $400,000; long-term liabilities $155,000; total liabilities $280,000; total shareholders' equity $320,000; net working capital turnover 20.

The following balance sheet and income statement should be used: The profit margin, the debt-equity ratio, and the dividend payout ratio are constant. Sales are expected to increase by $4,624 next year. What is the projected addition to retained earnings for next year?

The following balance sheet and income statement should be used: Hilltop, Inc. is currently operating at 75% of capacity. What is the required increase in fixed assets if sales are projected to increase by 30 percent?

Assume that Delalo, Inc. is operating at 80 percent of capacity. All costs and net working capital vary directly with sales. What is the amount of the pro forma net fixed assets if sales are projected to increase by 25%?

The following balance sheet and income statement should be used: Assume that Taylor, Inc. is operating at 85% of capacity. All costs and net working capital vary directly with sales. What is the amount of total fixed assets required if sales are projected to increase by 20 percent?

Assume that Creative Analysis, Inc. is currently operating at 90 percent of capacity and that sales are projected to increase to $10,000. What is the projected addition to fixed assets?

Silver's Jewelers has current sales of $138,900 and a profit margin of 8 percent. The firm estimates that sales will increase by 4% next year and that all costs will vary in direct proportion to sales. What is the pro forma net income?

Calculate the external financing needed given the following information: current sales = $275,000; current sales capacity = 75%; current fixed assets = $40,000; projected future sales = $475,000.

The profit margin, the debt-equity ratio, and the dividend payout ratio are constant. Sales are expected to increase by $525 next year. What is the projected addition to retained earnings for next year?