16: Financial PlanningP16-5 Halliwell Distribution wants to construct a pro forma balance sheet for 2016. Build the statement
using the following data and assumptions:
1 Projected sales for 2016 are $45 million.
2 Halliwell’s gross profit margin is 35%.
3 Operating expenses average 10% of sales.
4 Depreciation expense last year was $5 million.
5 Halliwell faces a tax rate of 35%.
6 Halliwell distributes 20% of its net income to shareholders as a dividend.
7 Halliwell wants to maintain a minimum cash balance of $3 million.
8 Accounts receivable equal 8.5% of sales.
9 Inventory averages 10% of the cost of goods sold.
10 Last year’s balance sheet lists net fixed assets of $30 million. All of these assets are depreciated
on a straight-line basis, and none of them will be fully depreciated for at least three years.
11 Halliwell plans to invest an additional $1 million in fixed assets that it will depreciate over a five-
year life on a straight-line basis.
11 In 2015, Halliwell reported ordinary shares and retained earnings of $20 million.
13 Accounts payable averages 9% of sales.
Will Halliwell’s cash balance at the end of 2016 exceed its minimum requirement of $3 million?
P16-6 Review the following 2016 balance sheet and income statement for T F Baker Cosmetics.
T F Baker Cosmetics balance sheet ($ in thousands)
Cash $ 5,000 Accounts payable $10,000
Accounts receivable 12,500 Short-term bank loan 15,000
Inventory 10,000 Long-term debt 10,000
Current assets $27,500 Ordinary shareholder equity 15,000
Gross fixed assets $65,000 Retained earnings 12,500
Less: Accum. depr 30,000 Total liabilities and equity $62,500
Net fixed assets $35,000
Total assets $62,500TF Baker Cosmetics income statement ($ in thousands)
Sales $150,000
Less: Cost of goods sold 120,000
Gross profit $ 30,000
Less: Operating expenses 15,000
Less: Depreciation 5,000
Less: Interest expense 2,000
Pre-tax profit $ 8,000
Less: Taxes (35%) 2,800
Net income $ 5,200