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Category > Business & Finance Posted 09 May 2017 My Price 8.00

The following is the financial statement of Executive Fruit Company for the year ended December 2014.

The following is the financial statement of Executive Fruit Company for the year ended December 2014.
INCOME STATEMENT, 2014
(Figures in $ Thousands)
  Revenue $ 9,500  
  Cost of goods sold   8,550  
       
  EBIT $ 950  
  Interest   190  
       
  Earnings before taxes $ 760  
  State and federal tax   304  
       
  Net income $ 456  
  Dividends   304  
       
  Additions to retained earnings $ 152  
       
 
BALANCE SHEET (Year-End, 2014)
(Figures in $ Thousands)
  Assets      
     Net working capital $ 950  
     Fixed assets   3,800  
       
     Total assets $ 4,750  
       
  Liabilities and shareholders' equity      
     Long-term debt $ 1,900  
     Shareholders' equity   2,850  
       
     Total liabilities and shareholders' equity $ 4,750  
       
 

The following are the first stage and second stage pro forma financial statements of Executive Fruit Company for the year ended December 2015.
 
First stage pro forma statements:
PRO FORMA INCOME STATEMENT, 2015
(Figures in $ Thousands)
  Revenue $ 10,450  
  Cost of goods sold   9,405  
       
  EBIT $ 1,045  
  Interest   190  
       
  Earnings before taxes $ 855  
  State and federal tax   342  
       
  Net income $ 513  
  Dividends   342  
       
  Additions to retained earnings $ 171  
       
 
PRO FORMA BALANCE SHEET (Year-End, 2015)
(Figures in $ Thousands)
  Assets      
     Net working capital $ 1,045  
     Fixed assets   4,180  
       
     Total assets $ 5,225  
       
  Liabilities and shareholders' equity      
     Long-term debt $ 1,900  
     Shareholders' equity   3,021  
       
     Total liabilities and shareholders' equity $ 4,921  
       
        Required external financing $ 304  
       
 
Second stage pro forma balance sheet:
PRO FORMA BALANCE SHEET (Year-End, 2015)
(Figures in $ Thousands)
  Assets      
     Net working capital $ 1,045  
     Fixed assets   4,180  
       
     Total assets $ 5,225  
       
  Liabilities and shareholders' equity      
     Long-term debt $ 2,204  
     Shareholders' equity   3,021  
       
     Total liabilities and shareholders' equity $ 5,225  
       
 

How would Executive FruitAc€?cs financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.)

Dividends fall by $_______ . Therefore, the requirement for external financing falls from $______ to $_______ . On the other hand, shareholders' equity will be increased by $_______ .

  

The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.):
   
  Long-term debt $   
  Shareholders' equity   
   
  Total $   
   
 

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