CHAPTER 3 Cash Flow and Financial Planning 139LG5
c. Analyze these statements, and discuss the resulting external financing
required.3–19 Integrative—Pro forma statements Provincial Imports, Inc., has assembled
statements and information to prepare financial plans for the coming year.Information related to financial projections for the year 2004:
(1) Projected sales are $6,000,000.
(2) Cost of goods sold includes $1,000,000 in fixed costs.
(3) Operating expense includes $250,000 in fixed costs.
(4) Interest expense will remain unchanged.
(5) The firm will pay cash dividends amounting to 40% of net profits after
taxes.
(6) Cash and inventories will double.
(7) Marketable securities, notes payable, long-term debt, and common stock
will remain unchanged.Provincial Imports, Inc.
Balance Sheet
December 31, 2003
Assets Liabilities and Stockholders’ EquityCash $ 200,000 Accounts payable $ 700,000
Marketable securities 275,000 Taxes payable 95,000
Accounts receivable 625,000 Notes payable 200,000Inventories (^5) (^0) (^0) , (^0) (^0) (^0) Other current liabilities (^5) , (^0) (^0) (^0)
Total current assets $1,600,000 Total current liabilities $1,000,000
Net fixed assets $ (^1) , (^4) (^0) (^0) , (^0) (^0) (^0) Long-term debt $ 500,000
Total assets $
3
,
0
0
0
,
0
0
0
Common stock $ 75,000
Retained earnings $ (^1) , (^3) (^7) (^5) , (^0) (^0) (^0)
Total liabilities and equity $
3
,
0
0
0
,
0
0
0
Provincial Imports, Inc.
Income Statement for the
Year Ended December 31, 2003
Sales revenue $5,000,000
Less: Cost of goods sold (^2) , (^7) (^5) (^0) , (^0) (^0) (^0)
Gross profits $2,250,000
Less: Operating expenses (^8) (^5) (^0) , (^0) (^0) (^0)
Operating profits $1,400,000
Less: Interest expense (^2) (^0) (^0) , (^0) (^0) (^0)
Net profits before taxes $1,200,000
Less: Taxes (rate40%) (^4) (^8) (^0) , (^0) (^0) (^0)
Net profits after taxes $ 720,000
Less: Cash dividends (^2) (^8) (^8) , (^0) (^0) (^0)
To retained earnings $
4
3
2
,
0
0
0