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Category > Accounting Posted 26 Sep 2017 My Price 10.00

Executive Cheese Company

Table 29.18 shows the 2010 financial statements for the Executive Cheese Company. Annual depreciation is 10% of fixed assets at the beginning of the year, plus 10% of new investment. The company plans to invest a further $200,000 per year in fixed assets for the next five years and net working capital is expected to remain a constant proportion of fixed

Income Statement

Revenue

  

$1,785

Fixed costs

  

53

Variable costs (80% of revenue)

  

1,428

Depreciation

  

80

Interest (at 11.8%)

  

24

Taxes (at 40%)

  

80

Net income

  

$ 120

Balance Sheet, Year-end
 

2010

2009

Assets:

    

Net working capital

$ 400

$ 340

Fixed assets

800

680

Total assets

$1,200

$1,020

Liabilities:

    

Debt

$ 240

$ 204

Book equity

960

816

Total liabilities

$1,200

$1,020

 

Sources and Uses

Sources:

  

Net income

$120

Depreciation

80

Borrowing

36

Stock issues

104

Total sources

$340

Uses:

  

Increase in net working capital

$ 60

Investment

200

Dividends

80

Total uses

$340

assets. The company forecasts that the ratio of revenues to total assets at the start of each year will remain at 1.75. Fixed costs are expected to remain at $53, and variable costs at 80% of revenue. The company’s policy is to pay out two-thirds of net income as dividends and to maintain a book debt ratio of 20%.

a. Construct a model for Executive.

b. Use your model to produce a set of financial statements for 2011.

Answers

Maurice Tutor
(5)
Status NEW Posted 26 Sep 2017 03:09 PM My Price 10.00

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