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Category > Management Posted 12 Nov 2017 My Price 10.00

Peabody & Peabody

Pro forma balance sheet Peabody & Peabody has 2012 sales of $10 million. It wishes to analyze expected performance and financing needs for 2014—2 years ahead. Given the following information, respond to parts a and b.

(1) The percents of sales for items that vary directly with sales are as follows:

Accounts receivable, 12%

Inventory, 18%

Accounts payable, 14%

Net profit margin, 3%

(2) Marketable securities and other current liabilities are expected to remain unchanged.

(3) A minimum cash balance of $480,000 is desired.

(4) A new machine costing $650,000 will be acquired in 2013, and equipment costing $850,000 will be purchased in 2014. Total depreciation in 2013 is forecast as $290,000, and in 2014 $390,000 of depreciation will be taken.

(5) Accruals are expected to rise to $500,000 by the end of 2014.

(6) No sale or retirement of long-term debt is expected.

(7) No sale or repurchase of common stock is expected.

(8) The dividend payout of 50% of net profits is expected to continue.

(9) Sales are expected to be $11 million in 2013 and $12 million in 2014.

(10) The December 31, 2012, balance sheet follows.

Peabody & Peabody Balance Sheet December 31, 2012 ($000)

  
 

Assets

  

Liabilities and Stockholders’ Equity

    

Cash

$ 400

Accounts payable

$1,400

  

Marketable securities

200

Accruals

400

  

Accounts receivable

1,200

Other current liabilities

80

  

Inventories

1,800

Total current liabilities

$1,880

  

Total current assets

$3,600

Long-term debt

2,000

  

Net fixed assets

4,000

Total liabilities

$3,880

  

Total assets

$7,600

Common equity

3,720

  
   

Total liabilities and

    
   

stockholders’ equity

$7,600

  

 

a. Prepare a pro forma balance sheet dated December 31, 2014.

b. Discuss the financing changes suggested by the statement prepared in part a.

 

Answers

Maurice Tutor
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Status NEW Posted 12 Nov 2017 02:11 PM My Price 10.00

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