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Chap 4

The document discusses the calculation of equity and external financing needed (EFN) in relation to pro forma income statements and balance sheets. It highlights that equity does not increase proportionally with other assets and provides examples of calculating dividends and EFN based on projected sales growth. The document also covers the implications of maintaining constant dividend payout ratios and the relationship between sales, assets, and liabilities.

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phaminhuong1997
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5 views33 pages

Chap 4

The document discusses the calculation of equity and external financing needed (EFN) in relation to pro forma income statements and balance sheets. It highlights that equity does not increase proportionally with other assets and provides examples of calculating dividends and EFN based on projected sales growth. The document also covers the implications of maintaining constant dividend payout ratios and the relationship between sales, assets, and liabilities.

Uploaded by

phaminhuong1997
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Chap 4:

Giải:

Giải:
Giải:
Giải:
It is important to remember that equity will not increase by the same percentage as the other assets.
If every other item on the income statement and balance sheet increases by 15 percent, the pro
forma income statement and balance sheet will look like this:

In order for the balance sheet to balance, equity must be:


Equity = Total liabilities and equity – Debt Equity = $18,170 – 5,980=$12,190
Equity increased by:
Equity increase = $12,190 – 10,600=$1,590
Net income is $7,245 but equity only increased by $1,590; therefore, a dividend
of:Dividend = $7,245 – 1,590 Dividend = $5,655 must have been paid.
Dividends paid is the plug variable.

2. Pro Forma Statements and EFN [LO1, 2] In the previous question, assume
Phillips pays out half of net income in the form of a cash dividend. Costs and assets
vary with sales, but debt and equity do not. Prepare the pro forma statements and
determine the external financing needed.
​ ​ ​

Note that the balance sheet does not balance. This is due to EFN. The EFN for
this company is: EFN = Total assets – Total liabilities and equity EFN = $18,170
– 19,422.50 = –$1,252.50

Giải:
Giải:
​ ​ ​
Assets, costs, and current liabilities are proportional to sales. Long-term debt and
equity are not. The company maintains a constant 40 percent dividend payout ratio.
As with every other firm in its industry, next year’s sales are projected to increase by
exactly 15 percent. What is the external financing needed?
Assets and costs are proportional to sales. Debt and equity are not. The
company maintains a constant 30 percent dividend payout ratio. No
external equity financing is possible. What is the internal growth rate?
Sustainable growth rate?
Giải:
Giải:
10. Applying Percentage of Sales [LO1] The balance sheet for the Heir Jordan
Corporation follows. Based on this information and the income statement in the
previous problem, supply the missing information using the percentage of sales
approach. Assume that accounts payable vary with sales, whereas notes
payable do not. Put “n/a” where needed.

11. EFN and Sales [LO2] From the previous two questions, prepare a pro
forma balance sheet showing EFN, assuming a 15 percent increase in sales, no
new external debt or equity financing, and a constant payout ratio.​
Giải:
​
​ ​ ​ ​
​ ​ ​
25.Calculating EFN [LO2] The most recent financial statements for Moose
Tours, Inc., follow. Sales for 2009 are projected to grow by 20 percent.
Interest expense will remain constant; the tax rate and the dividend
payout rate will also remain constant. Costs, other expenses, current
assets, and accounts payable increase spontaneously with sales. If the
firm is operating at full capacity and no new debt or equity is issued, what
external financing is needed to support the 20 percent growth rate in
sales?
​

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